1. You purchase a bond for $15,000 which you plan to hold until it matures in 10 years. It pays 4% SIMPLE interest per year. How much interest will you earn on your investment if you hold it as planned?

2. To improve your earnings from the investment in #1 you invest each year's interest (which is paid at the end of the year) in a money market fund that pays 2% compound interest per year. You do this only until the bond matures in the beginning of year 10. What will you earn if you do this?

3. Your firm must replace its delivery truck, so you purchase one for $42,500. You finance it for 5 years at 3% per year and make equal MONTHLY PAYMENTS each month for the 5 years (60 months). Assuming you finance the entire amount how much will you have PAID for the truck?

4. When shopping to replace the delivery truck in the last question you found a competing dealer who offered this choice: Option 1. Get $3000 'cash back', then pay the balance in 5 annual payments at 2.0%; Option 2. pay 'full price' in 5 annual installments at no (0%) interest. Which is the better deal, that is, under which deal will you PAY LESS? How much more or less does the better option cost compared to your answer in number 3 once all payments are made?