2. You buy a 5% coupon bond that pays coupons annually. Assume the annual interest rate is 7%, the bond matures in 10 years from now and par value is $1000. Calculate the value of the bond a. $874.28 b. $1,000.00 C. $817.85 d. $859.53 e. $1,048.17 3. Which of these is FALSE regarding bonds priced at a premium or at a discount? The price you pay for the bond with a premium is higher than the face value The price you pay for the bond with a discount is lower than the face value When a bond sells at a discount, the Coupon Rate on the bond is less than the market rate of return for a bond with similar risk When a bond sells at a premium, the Coupon Rate on the bond is less than the market rate of return for a bond with similar risk If the Coupon Rate is equal to the market rate, the bond will sell at Face Value. a. b. c. d. e. 4. What is the present value of a perpetuity that will pay $1,500 per year, with the first payment due 3 years from now? Assume the annual interest rate is 8%. (Suggestion: A time line might prove helpful) $13,396 $14,468 $16,075 $18,750 Can't determine the value with information provided a. b. . d. e. 5. A business wants to buy a truck. The dealer offers to sell the truck for either $120,000 now, or six yearly payments of $25,000. Which of the following is closest to the interest rate being offered by the dealer? 3.5% 5.8% 6.8% 7.8% 9.8% a. b. c. d. c