2) A broker offers to sell you a Treasury bond that will pay $2,500 three years from now. Banks are currently offering a guaranteed 5% interest, compounded annually, on their 3-year CDs. If you don't buy the bond, you will buy a CD. The 5% rate paid on the CDs is your opportunity cost, or the rate of return you would earn on an alternative investment of similar risk. Given these conditions, what's the most you should pay for the bond? 3) If you found a nickel and decided to invest it for 100 years at 25% interest, compounded annually, how much would this nickel be worth at the end of 100 years? 4) If we know that a bond has a cost of $500 and that it will return $800 in 12 years, what is the interest rate, assuming that it is compounded annually? 5) XYZ corporation earnings per share were $2.78, and its growth rate was 9.5% per year for 10 years. At that rate, how long would it take for its earnings per share to double? 6) If you deposit $500 at the end of each year for 10 years and earn 8% per year, how much would you have at the end of 10 years? 7) In number 6 above, what if the deposits were made at the beginning of each year? How much would you have at the end of the 10 years? 8) If you must have $25,000 in 10 years, but you can contribute only $2,000 per year, what rate of return must you earn to reach your goal? 9) If you are 20 years old, but decide to put $7 every day into an envelope. At the end of every year you will take the contents of the envelope and invest it into an account which draws 9% interest, compounded annually. If you draw this money, plus interest, at age 70, how much money will you have? 10) You just won the Powerball lottery. You are given the following choices: 1) you can take $2,500,000.00 at the end of each of the next 30 years; OR 2) you can receive a one-time payment of $30,000,000.00 today. Assume that the current interest rate is 5%. Which option is most valuable? 11) For 20 points, not bonus points, give details, and show your work about things that are not on this test. Things which spoke to you, and were of interest to you; things which show me that you have a great understanding about "time values of money," and answer the following: I can't believe you didn't ask about