1. What is the discount rate assuming the present value of $840 at the end of 1-year is $765?

2. What is the Future value of $3,500 deposited for 12 years at 5% compounded annually?

3. If $2,800 is discounted back 4 years at an interest rate of 8% compounded semi-annually, what would be the present value?

4. Determine the future value of $6,000 after 5 years if the appropriate interest rate is 8%, compounded monthly.

5. Consider a newlywed who is planning a wedding anniversary gift of a trip to Dubai for her husband at the end of 10 years. She will have enough to pay for the trip if she invests $5,000 per year until that anniversary and plans to make her first $5,000 investment on their first anniversary. Assume her investment earns an 8 percent interest rate, how much will she have saved for their trip if the interest is compounded in each of the following ways? a. Annually b. Quarterly c. Monthly

6. If you applied for a loan of $10,000 from two different banks, and Bank Y makes an offer to charge interest of 7% compounded monthly and Bank Z offers you 8% annual interest due at the end of the year. What will be the difference in the Effective Interest Rate charged by the two banks?

7. Your grandfather left an inheritance for you of $80,000. However you can only drawdown on the investment as follows: Years 1 4 $10,000 each year and Year 5 $40,000 Interest on the fund is 7.5%. What is the present worth of this inheritance?

8. Your choice of vehicle is the Honda CRV, which you plan to purchase in 5 years time after you have completed your studies. You plan to save a certain sum of money every quarter for the next 5 years, and the bank offers you a rate of 8% per annum on your savings. How much do you need to save every quarter to meet the price of your vehicle which is $150, 000.

9. A bond matures in 12 years and pays a 6 percent annual coupon. The bond has a face value of $1,000 and currently sells for $890. What is the bonds current yield and yield to maturity?

10. The face value for Karens Limited bonds is $100,000 and has a 2 percent annual coupon. The 2 percent annual coupon bonds matures in 2022, and it is now 2012. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. How much should Karen sell her bonds today?

11. Your client has been offered a 5-year, $1,000 par value bond with a 10 percent coupon. Interest on this bond is paid quarterly. If your client is to earn a nominal rate of return of 12 percent, compounded quarterly, how much should she pay for the bond?

12. What is the semi-annual coupon bonds nominal yield to maturity (YTM), if the years to maturity is 15 years, and sells for 119% with coupons rate of 10%? Assume the par value of the bond is $1,000. 13. The current price of a 10-year, $1,000 par value bond is $1,158.91. Interest on this bond is paid every six months, and the nominal annual yield is 14 percent. Given these facts, what is the annual coupon rate on this bond? 14. Bond Relationships. Select one or more of the following phrases to complete the following sentences. increase , decrease, par, discount, premium, less than, more than, greater , less a. If the current interest rate exceeds the bonds coupon rate, the bond will sell at a ___________. b. The value of a bond to increase if there is a/an ________ in interest rates. c. A bonds coupon rate is more than the interest rate, therefore the bond is selling at a _____________. d. As interest rate increases the value of a bond will ______________. e. If the bondholders required rate of return equals the coupon interest rate, the bond will sell at _________. f. A premium bond sells for ____________ as maturity approaches. g. The discount bond sells for ____________ as maturity approaches. h. A bondholder with a short-term bond is exposed to ___________ interest rate risk than when owing a long-term bond. 15. Which of the following statements is most correct with regards to a 10 year bond with a 9% annual coupon rate and a YTM of 8%? a) The bond is selling at a discount. b) The bonds current yield is greater than 9 percent. c) If the yield to maturity remains constant, the bonds price one year from now will be lower than its current price.