1. If the present value of $250 expected one year from today is $200, what is the one-year discount rate?

2. John House has taken a $250,000 mortgage on his house at an interest rate of 6 percent per year. If the mortgage calls for 20 equal annual payments, what is the amount of each payment?

3. If you invest $100 at 12 percent for three years, how much would you have at the end of three years using a monthly compound interest?

4. Mr. X invests $1,000 at a 10 percent nominal rate for one year. If the inflation rate is 4 percent,
   1. What is the real value of the investment at the end of one year?
   2. Explain the difference between real rate and inflation rate

5. A three-year bond has an 8 percent coupon rate and a $1,000 face value. If the yield to maturity on the bond is 10 percent,
   1. Calculate the price of the bond assuming that the bond makes quarter coupon payments.
   2. Calculate the price of the bond assuming that the bond makes semiannual coupon payments.
   3. Explain the reasons for the differences between your answer in (a & b)