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 Enterprises’ 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 Enterprises’ 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%

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