1.Suppose you invest $800 in an account paying 6% interest per year.

The balance in the account (with compounded interest) after

44 years is $___________________

(Round to the nearest cent.)

The balance in the account (with simple interest) after

44 years is$_________________________

(Round to the nearest cent.)

How much of this balance corresponds to "interest on interest"?

The interest on interest is $_____________________

(Round to the nearest cent.)

What is the balance in the account after

25 years?

The balance in the account (with compounded interest) after

25 years is $_____________________

(Round to the nearest cent.)

The balance in the account (with simple interest) after

25 years is $______________

(Round to the nearest cent.)

The interest on interest is $___________________

(Round to the nearest cent.)

2. Suppose you currently have $5,300 in your savingsaccount, and your bank pays interest at a rate of 0.46% per month. If you make no further deposits orwithdrawals, how much will you have in the account In 44 years' time, you will have $_____________in the account. (Round to the nearest cent.)

3. You can earn $50 in interest on a $1,000 deposit for 8 months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a $1,000deposit for:

For a 66-month,

$1,000 deposit you will earn $________________ (Round to the nearest cent).

For a 1-year, $1,000 deposit you will earn $_________________ (Round to the nearest cent).

For a 1.5-year,$1,000 deposit you will earn $____________ (Round to the nearest cent).

4. Your best taxable investment opportunity has an EAR of 4.0%.Your best tax-free investment opportunity has an EAR of 3.0%.

If your tax rate is 30%, which opportunity provides the higher after-tax interest rate?

The ________________ (Taxable or Non-Taxable) investment opportunity has the higher after-tax interest rate with ___________%

5. Suppose a 10-year, $1,000 bond with a 8% coupon rate and semiannual coupons is trading for a price of $1,034.74.

a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

b. If the bond's yield to maturity changes to 9% APR, what will the bond's price be?

a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

The YTM is ____________________% (Round to two decimal places.)

b. If the bond's yield to maturity changes to 9%APR, what will the bond's price be?

The price is $_______________ (Round to the nearest cent.)