1. When using discounted cash flow analysis to value a project, explain why it is important to measure the risk of the project and associate an expected return with that risk measure.
2. We have a 30-year 10 % bond with a YTM of 10%. It the interest rates alter by 3%, show the price change with duration and convexity if convexity is 35. What is the exact price alteration?
3. What is the NPV of a project that costs $500,000 and 8%returns $175,000 annually for 3 years if the opportunity cost of capital is 8%? (Round the value to the nearest $.01)