Question

Q29. You are offered an investment that requires you to put up $5.000 today exchange for $12,000 15 years from now. What is the annual rate of return on this investment? A. 3.81% B. 2.40% C. 4.67% D. 6.01% E. 15.00% Q30. At the end of each month for the next ten years you will receive cash flows of $50. If the appropriate discount rate is 7.2%, compounded monthly (i.e., the APR is 7.2%), how much would you pay for the annuity? A. $577.24 B. $4,524-43 C. $694.28 D. $4.575.65 E. $4,268.33 031. Thomas & Percy Rail bonds have a 9.5 percent coupon and pay interest semi- annually. Currently, the bonds are priced at $1,063.15. The company issued this 20-year bond twelve years ago. What is the yield to maturity? A. 9.38 percent B. 9.13 percent C. 8.82 percent D. 8.64 percent E. 8.40 percent ONE ONE

Answer 1

1)

Annual rate = 6.01%

Keys to use in a calculator:

PV 5000

FV -12000

N 15

CPT I/Y

2)

Number of periods = 10 * 12 = 120

Payment = $4,268.33

Keys to use in a calculator:

2nd I/Y 12

PMT 50

I/Y 7.2

N 120

CPT N

3)

Assuming face value to be $1000

Coupon = (0.095 * 1000) / 2 =47.5

Number of periods = 8 * 2 = 16

Yield to maturity = 8.40 percent

Keys to use in a calculator:

2nd I/Y 2

FV 1000

PMT 47.5

N 16

PV -1063.15

CPT I/Y