This question has been answered by Expert on Mar 24, 2011. View Solution
david.m.mason1 posted a question
1. Sue now has \$125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

a. \$205.83
b. \$216.67
c. \$228.07
d. \$240.08
e. \$252.08

2. How much would \$20,000 due in 50 years be worth today if the discount rate were 7.5%?

a. \$438.03
b. \$461.08
c. \$485.35
d. \$510.89
e. \$537.78

3. Suppose the U.S. Treasury offers to sell you a bond for \$747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for \$1,000. What interest rate would you earn if you bought this bond at the offer price?

a. 4.37%
b. 4.86%
c. 5.40%
d. 6.00%
e. 6.60%

4. Bob has \$2,500 invested in a bank that pays 4% annually. How long will it take for his funds to double?

a. 14.39
b. 15.15
c. 15.95
d. 16.79
e. 17.67

5. You want to buy a new sports car 3 years from now, and you plan to save \$4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3 years from now?

a. \$11,973
b. \$12,603
c. \$13,267
d. \$13,930
e. \$14,626

6. Morin Company's bonds mature in 8 years, have a par value of \$1,000, and make an annual coupon interest payment of \$65. The market requires an interest rate of 8.2% on these bonds. What is the bond's price?

a. \$903.04
b. \$925.62
c. \$948.76
d. \$972.48
e. \$996.79

7. Adams Enterprisesâ€™ noncallable bonds currently sell for \$1,120. They have a 15-year maturity, an annual coupon of \$85, and a par value of \$1,000. What is their yield to maturity?

a. 5.84%
b. 6.15%
c. 6.47%
d. 6.81%
e. 7.17%

8. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of \$1,000, and it makes semiannual interest payments. If you require an 8.4% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

a. \$1,105.69
b. \$1,133.34
c. \$1,161.67
d. \$1,190.71
e. \$1,220.48

9. Grossnickle Corporation issued 20-year, noncallable, 7.5% annual coupon bonds at their par value of \$1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

a. \$1,113.48
b. \$1,142.03
c. \$1,171.32
d. \$1,201.35
e. \$1,232.15

10. Malko Enterprisesâ€™ bonds currently sell for \$1,050. They have a 6-year maturity, an annual coupon of \$75, and a par value of \$1,000. What is their current yield?

a. 7.14%
b. 7.50%
c. 7.88%
d. 8.27%
e. 8.68%
Dear Student,

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