8. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totaling $1,500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively. *

a) $700 $500 $300

b) $300 $500 $700

c) $500 $500 $500

d) Any of the above, since they each sum to $1,500.

e) None of the above

9. You are going to place $12,500 into a certificate of deposit (CD) at a 6% annual rate (compounded annually) with a maturity of 30 months. How much money will you receive when the CD matures? *

a) $0

b) $14,460

c) $14,491

d) $14,518

e) None of the above

10. CT agency provided us with the following info regarding a 5-year bond: Real risk-free rate = 3% Inflation rate = 5%/year for each of next two years, 4% thereafter MRP = 0.4*(t 1) % where t is the securitys maturity, DRP = 1 % and Yield= i= 11%.; Find the LP (Liquidity Premium). *

a) 0.5%

b) 1%

c) 1.5%

d) 2%

e) None of the above

11. You expect to deposit the following cash flows at the end of years 1 through 5, $1,000; $4,000; $9,000; $5,000; and $2,000 respectively. What is the future account value at the end of year 6 if you can earn 10% compounded annually? *

a) $15,633.62

b) $21,000.00

c) $25,178.10

d) $27,695.91

e) None of the above