7. Youve just joined the investment banking firm of Dewey. Theyve offered you two different salary arrangements. The first one is that you can have $95,000 per year for the next two years, however, the second one is that you can have $70,000 per year for the next two years, along with a $45,000 signing bonus today. The bonus is paid immediately, and the salary is paid at the end of each year. If the interest rate is 10 percent, which do you prefer? *

a. The first option

b. The second option

c. Indifferent

d. Neither

e. None of the above

8. You want to buy a new sports car from Muscle Motors for $68,000. The contract is in the form of a 60-month annuity due at a 7.85 percent annually. What will your monthly payment be? *

a. $1,736.22

b. $1255.29

c. $1450.87

d. $1,373.92

e. None of the above

9. Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn 7.5% on his invested funds. How much could he withdraw at the end of each of the next 25 years and end up with zero in the account? *

a. $28,843.38

b. $30,361.46

c. $31,959.43

d. $33,641.50

e. None of the above

10. Garvin Enterprises bonds currently sell for $1,150. They have a 6-year maturity, an annual coupon of $85, and a par value of $1,000. What is their current yield? *

a. 5.36%

b. 6.12%

c. 7.39%

d. 8.07%

e. None of the above

11. Suppose the U.S. Treasury offers to sell you a bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price? *

a. 6.76%

b. 4.86%

c. 5.40%

d. 6.00%

e. None of the above

12. What would be the yield to call of a 14 percent coupon rate, $1,000 par value bond priced at $1,160 if the call can be made in four years at a price of $1,080? *

a. 10%

b. 11.6%

c. 10.64%

d. 14%

e. None of the above

13. Sanofi Company is about to issue a bond with semi-annual coupon payments, a coupon rate of 8% and par value of $1,000. The yield-to-maturity for this bond is 10% and the bond matures after 5 years. If the bond price is $922.78, what would be the current yield? *

a. 8%

b. 8.67%

c. 10%

d. 11%

e. None of the above