5. Suppose you save $19,000 per year in an ordinary annuity promising you an interest rate of i=7.625% compounded once per year. How much will you have after 35 years?

6. A risk-free bond will pay you $1000 in 1 year. The annual discount rate is i=19.69% compounded annually. What is the bonds present value?

7. A risk-free bond will pay you $1000 in 2 years and nothing in between. The annual discount rate is i=67.5% compounded annually. What is the bonds present value?

8. You buy a 30 year zero coupon bond which will pay you $10,000 in 30 years at an annual yield of i=1% compounded once per year. A few minutes later the annual yield rises to i=2% compounded once per year. What is the percent change in the value of the bond?

(Hint: recall the formula for percent change. The answer should be negative.)

11. An investment gives you a 18.35% nominal return over 1 year. There was 2.5% inflation over that year. What was your exact real return? (Dont use the Fisher Equation.)

12. An investment gives you an 8.35% nominal return over 1 year. There was 1.5% inflation over that year. According to the Fisher Equation what was your real return?

15. You would like to develop an office building. Your analysts forecast that it will cost you $1,000,000 immediately (time 0), and it will cost you $500,000 in one year (time 1). They forecast you can sell the building for $2,400,000 in two years (time 2). If your discount rate is i=63% should you invest in this building? Write 0 for no, and write 1 for yes.