1.You can buy a security for $1,000. It is expected to pay you $80 at the end of each of the next 3 years, then to pay you $1,080 at the end of the 4^th year. What is the expected annual rate of return on this investment?

a. 6.86%

b. 7.22%

c. 7.60%

d. 8.00%

e. 8.40%

2.Assume that you plan to buy a condo 7 years from now. You have no funds now, but you estimate that you can save $3,500 per year. You plan to deposit the money in a bank that pays 5% annual interest, and you will make the first deposit at the end of the current year. How much will you have 7 years from now? Disregard taxes.

a. $27,089.99

b. $27,748.60

c. $28,497.03

d. $29,209.46

e. $29,939.69

3.A Treasury bond that will mature in 5 years currently sells for $500. The bond will pay nothing until it matures, at which time it will pay $1,000. By how much would the annual interest rate one could expect to earn on the bond change if the price suddenly rose to $600?

a. -4.93%

b. -4.11%

c. -3.29%

d. +2.11%

e. +2.74%