Question
27). Dr. Fadel is valued employee at the university. The university plans to offer him a $100,000 bonus, payable when he retires in 20 years.
27). Dr. Fadel is valued employee at the university. The university plans to offer him a $100,000 bonus, payable when he retires in 20 years. If the university deposits $200 a month in a sinking fund, what interest rate must it earn, with monthly compounding, to guarantee that the fund will be worth $100,000 in 20 years
a. 6.66%
b. 7.78%
c. 8.99%
d. 5.98%
28) MOHAMMED has excess cash that is to be invested for four years. He can purchase four-year Treasury notes that offer a 9 percent yield. Alternatively, he can purchase new 20-year Treasury bonds for $2.9 million that offer a par value of $3 million and an 11 percent coupon rate with annual payments. The manager expects that the required return on these same 20-year bonds will be 12% percent four years from now. What is the forecasted market value of the twenty-year bonds in four years?
a. 2,790,720
b. 3,987.09
c. 3,908.098
d. 2,898.89
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