1. You have recently purchased an annual interest-paying bond with a time to maturity of ten years, a yield to maturity of 5%, and coupon rate of 3.8%. If you reinvest the remaining interest payments and principle repayment at an annual rate of 4%, how much money will you have in ten years? 2. In 2013, famous street artist, Banksy, set up an unmarked stall in New York's Central Park selling paintings for $60. That same year at auction, similar paintings were sold for $31,200. During the year, the inflation rate was 1.5%. Suppose you were lucky enough to purchase a painting, what were the nominal and real rates of return for the paintings? 3. You recently won a lottery prize that is paid out as an after-tax lump sum payment of $1 million. You reinvest this lump sum in a portfolio earning 9% per year. You want to withdraw money from this portfolio at the end of each year for the rest of time and you want your withdrawals to increase 3% per year. If your first withdraw is one year from now, how much will your second withdraw be? 4. You own a callable bond that matures in ten years and can be called in five years. The bond currently sells for $895.18, has 4.7% annual coupon rate, and a call price of $1,070. What is the bond's yield to call? 5. You are comparing two loan offers from competing banks. Bank X offers an annual percentage rate of 12.25% with interest compounded monthly. Bank Y offers an annual percentage rate of 12.05% with interest compounded quarterly. What are the effective annual rates for loan offers X and Y? 6. You have been offered a project paying $30,000 at the end of each year for the next 15 years. What is the maximum amount of money you would invest in this project if you expect 8% rate of return to your investment? 7. XYZ Corp has recently paid a dividend of $20.25 and going forward dividends are expected to grow at 5% per year. If the required return on this stock is 11%, what would XYZ Corp's stock be worth in one year, immediately after it pays its next dividend is paid? 8. Use the following excerpt from the Daily Treasury Yield Curve Rates from 10/19/2020. Date 10/19/2020 1 year 2 year 3 year 5 year 0.13% 0.16% 0.19% 0.34% If expectations theory is true, what interest rate would you expect a 3-year Treasury to pay 2 years from now (i.e. over years 3-5)? 1. You have recently purchased an annual interest-paying bond with a time to maturity of ten years, a yield to maturity of 5%, and coupon rate of 3.8%. If you reinvest the remaining interest payments and principle repayment at an annual rate of 4%, how much money will you have in ten years? 2. In 2013, famous street artist, Banksy, set up an unmarked stall in New York's Central Park selling paintings for $60. That same year at auction, similar paintings were sold for $31,200. During the year, the inflation rate was 1.5%. Suppose you were lucky enough to purchase a painting, what were the nominal and real rates of return for the paintings? 3. You recently won a lottery prize that is paid out as an after-tax lump sum payment of $1 million. You reinvest this lump sum in a portfolio earning 9% per year. You want to withdraw money from this portfolio at the end of each year for the rest of time and you want your withdrawals to increase 3% per year. If your first withdraw is one year from now, how much will your second withdraw be? 4. You own a callable bond that matures in ten years and can be called in five years. The bond currently sells for $895.18, has 4.7% annual coupon rate, and a call price of $1,070. What is the bond's yield to call? 5. You are comparing two loan offers from competing banks. Bank X offers an annual percentage rate of 12.25% with interest compounded monthly. Bank Y offers an annual percentage rate of 12.05% with interest compounded quarterly. What are the effective annual rates for loan offers X and Y? 6. You have been offered a project paying $30,000 at the end of each year for the next 15 years. What is the maximum amount of money you would invest in this project if you expect 8% rate of return to your investment? 7. XYZ Corp has recently paid a dividend of $20.25 and going forward dividends are expected to grow at 5% per year. If the required return on this stock is 11%, what would XYZ Corp's stock be worth in one year, immediately after it pays its next dividend is paid? 8. Use the following excerpt from the Daily Treasury Yield Curve Rates from 10/19/2020. Date 10/19/2020 1 year 2 year 3 year 5 year 0.13% 0.16% 0.19% 0.34% If expectations theory is true, what interest rate would you expect a 3-year Treasury to pay 2 years from now (i.e. over years 3-5)