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1. Joe now has $600. How much would he have after 5 years if he leaves it invested at 6.0% with annual compounding? a. $555.00
1. Joe now has $600. How much would he have after 5 years if he leaves it invested at 6.0% with annual compounding? a. $555.00 b. $734.66 c. $484.65 d. $802.94 e. $897.44 2. How much would $20,000 due in 20 years be worth today if the discount rate is 9.0%? a. $168,132.32 b. $295,876.44 c. $3,568.61 d. $5,352.93 e. $3,879.78 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% Assume that interest rates on 10-year Treasury and corporate bonds are as follows: Treasury Bond = 7.72%; AAA = 8.72%; A = 9.64%; and BBB = 10.18%. The difference in these rates is primarily caused by: a. Maturity rate differences.. b. Default risk differences. c. Inflation differences. d. Real risk free rate differences
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