Question

10. You plan to save $3,400 per year for the next three years, beginning now, to pay for a vacation. If you can invest it at 7 percent, how much will you have at the end of three years? A) $8,599 B) $7,944 C) $9,336 D) $11,696 11. Ray has $5,000 to invest in a small business venture. His partner has promised to pay him back $8,200 in five years. What is the return earned on this investment? A) 9.3% B) 8.7% C) 11.1% D) 10.4% 12. Martha has been offered a 15year bond issued by Barry, Inc., at a price of $840. The bond has a coupon rate of 5 percent and pays the coupon semiannually. Similar bonds in the market will yield 7 percent today. Should she buy the bonds at the offered price? A) Yes, the bond is worth more at $867 B) No, the bond is only worth $792 C) Yes, the bond is worth more at $973 D) No, the bond is only worth $816 13. Bright Electronics is issuing 25 year bonds that will pay coupons semiannually. The coupon rate on this bond is 6 percent. If the market rate for such bonds is 8 percent. what will the bonds sell for today? A) $1,098 B) $785 C) $1,116 D) $724 14. Four years ago, Jane bought a 10-year bond that pays 6 percent semiannually for $981. Today, she sold it for $1,067. What is the realized yield on her investment? (Round to the nearest percent.) A) 7% B) 8% C) 9% D) 10%

Answer 1

Q 10	Option d
Q 11	Option d
Q12	Option D
Q13	Option B
Q14	Option A

Workings

Q 10	Option d	Amount after 3 years	$11,695.81
Q 11	Option d	Rate of return	10.40%
Q12	Option D	Price of bond	$816.08
Q13	Option B	Price of bond	$785.18
Q14	Option A	Rate	6.74%

AutoSave © of HO- Book1 - Excel Sign in - o X File Home Insert Draw Page Layout Formulas Data Review View Help O Tell me what you want to do Share Comments = = Calibri 11 BI U - - - A À - A - Insert 2X Delete - Format = dy ale Currency E 3- $ - % 9 OSOS Conditional Format as Formatting Table Alignment to Number Styles 2' AZ O Z Sort & Find & ♡ Filter - Select Paste Cell Styles Clipboard Font Cells Editing D1 =FV(7%,3,-3400,,1) A. D F | 1 Q 10 Option d Amount after 3 years =FV(7%,3,-3400,,1) 3 Q 11 Option d Rate of return =RATE(5,,-5000,8200) 5 Q12 Option D Price of bond --PV(7%/2,15*2,5%*1000/2,1000) 7 Q13 Option B Price of bond --PV(8%/2,25*2,6%*1000/2,1000) 9 Q14 Option A Rate =2*RATE(10*2,6%*1000/2,-981,1067)