1. What's the present value of $6,500 discounted back 4 years if the appropriate interest rate is 5%, compounded monthly? a. $5230.78 b. $5323.96 c. $5356.24 d. $5415.37 6500 ( 2. You have a chance to buy an annuity that pays $20,000 at the beginning of each year for 5 years. You could earn 4% on your money in other investments with equal risk. What is the most you should pay for the annuity? a. $88,176.80 b. $89,243.50 c. $90,457.50 d. $92,597.90 3. Inflation is expected to increase steadily over the next 10 years, there is a positive maturity risk premium (MRP) on both Treasury and corporate bonds, and the real risk-free rate of interest is expected to remain constant. Which of the following statements is CORRECT? a. The Treasury yield curve under the stated conditions would be humped rather than have a consistent positive or negative slope. b. The yield on any corporate bond must exceed the yields on all Treasury bonds. C. The yield on 10-year Treasury securities must exceed the yield on 7-year Treasury securities. d. The yield on 7-year corporate bonds must exceed the yield on 10-year Treasury bonds. e. The stated conditions cannot all be true - they are internally inconsistent