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Unformatted text preview: Answers to questions 4.7 GRAFT is offering a signing bonus of $50,000 plus an annual salary of 80,000. Compounding the interest on $50,000, (50,000/(1.04)^5) after 5 years it would be valued at $60,832.65. This would mean an additional interest gain of $10,832.65 over the $50,000 bonus. After adding the annual salary to the bonus with interest gain, this makes the offer from GRAFT worth $460,832.65 for the five year contract. The SAFe offer is for $95,000 per year for a total of $475,000. Being that the offer from SAFe is valued at $14,167.35 for than GRAFT, all else being equal; the offer from SAFe is more attractive. 4.8 If people believe the journalist and stop investing in stocks, then people will invest in bonds since they have an inverse relationship. Because the demand for bonds would increase the value that investors put on them will increase. This will drive up purchase price for bonds which will lower the yield to maturity interest on bonds.lower the yield to maturity interest on bonds....
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- Spring '09