d. None of the above are correct to the nearest penny.
8. Suppose that the price of a bond is equal to the sum of the present value of its future payments. Suppose
further that this bond pays $50 in one year and $1,050 in two years. What is the price of the bond if the
interest rate is 5 percent?
9. On May 25, 1975 three pals graduated from high school, pooled together $1000 and put the money into an
account promising to pay 8% for the next 30 years. On May 25, 2005 they withdrew the money? To the
nearest dollar, how much did they withdraw?
d. None of the above are correct to the nearest dollar.
10. Which of the following is the correct expression for finding the present value of a $1,000 payment one year
from today if the interest rate is 6 percent?
d. None of the above is correct.
11. A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the
present value of these payments?
a. $2,000/(1 +
b. $1,000 + $1,000/(1 +
c. $1,000/(1 +
) + $1,000/(1 +
d. $1,000(1 +
) + $1,000(1 +
12. Which of the following changes would increase the present value of a future payment?
a. an increase in the size of the payment