1. (8 marks) Time Value of Money a. How much is a cash flow of $1,000 to be paid in two years and $2,000 to be paid in four years worth today if interest rate is 6%? (4 marks) b. What is the nominal interest rate of a $1,000 pure discount loan that the I borrower is required to pay back $1,200 in six months? (4 marks) 2. (8 marks) Your company is looking for a 40-channel recording and mixing con- sole. You can either buy one at an upfront cost of $158,400, or lease one for 5 year at $3,544 a month. The machine is expected to obsolete in 5 years with no resale value. Should you buy one or lease one if the company's opportunity cost of capital is 12%? Explain your answer. 3. (8 marks) Suppose you take out a $10,000 loan at 5% APR that requires five equal annual payments, with the first payment starting two years from today. What is the annual payment? 4. (8 marks) Consider two $1,000 par coupon bonds with the same coupon rate and credit rating. Bond A has a maturity of ten years and bond B has five years until maturity. a. Use a numerical example to prove that Bond A has higher interest risk than bond B. (5 marks) b. Explain why bonds with longer maturities carry higher interest rate risk than bonds with shorter maturities. (3 marks) 5. (8 marks) The table below is the YTM of U.S. Treasuries with different matu