Question

5. What is the interest rate if Fif = 1,000, PV 600, and t 50 periods? 6. What is the annual rate (APR) if compounding is monthly, and the interest rate is 4% 7. Let there be two compounding periods per year. Let the APR be 10%. What is the EAR'? 8. What is EAR if APR 6% and compounding is monthly? 9. Consider an annuity. What is the payment amount per month if PVA = 6%, and for five years? 000, r 10. Will C go up or down if be if r increases? 11. You believe that you will need 8800,000 by the time you retire in 40 years Assume an interest rate of 6% per year. How much will you need to contribute to your IRA (individual retirement account) each year? 12. Given the above facts, how much would you have to contribute if you assumed that the interest rate will be 9.7%? 13. What is the value of the bond if the bond is 6% bond, ten year bond, and the YTM is 8%? As in most bonds, coupons are paid semiannually 14. What is the coupon of the bond. There is ten years outstanding on the bond, the

Answer 1

1.
=(FV/PV)^(1/t)-1
=(1000/600)^(1/50)-1
=1.03%

2.
=((1+EAR)^(1/12)-1)*12
=((1+4%)^(1/12)-1)*12
=3.93%

3.
=(1+APR/2)^2-1
=(1+10%/2)^2-1
=10.25%

4.
=(1+APR/12)^12-1
=(1+6%/12)^12-1
=6.17%

P.S.: I am not allowed to answer more than 4 questions