Imagine today is your 68th birthday and you decide to retire as of tomorrow morning. You have an annuity that pays you $80,000 per year but without an inflation adjustment. If inflation can be expected to average 6% per year, use the rule of 72 to determine how old you will be when the purchase power of your annuity has been cut in half to the equivalent of only $40,000. (This question is a slight variation on the way we talk about the Rule of 72 most of the time, but the logic is the same.)

72 years old

76 years old

80 years old

84 years old

88 years old

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Question 342 pts

Suppose that the interest ("coupon") rate on a corporate bond is 8 percent. If you own one bond with a face value of $1,000, how much interest will you receive every six months from this investment?

$4

$8

$40

$48

$80

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Question 352 pts

Imagine that a mutual fund company has $100 million in assets and $90 million in liabilities. If there are 200,000 shares of the fund, what is the net asset value per share?

$5

$10

$50

$100

$2000

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Question 362 pts

Willy Wise participates in his employer's 401(k) retirement plan and contributes $4000 in the course of the year out of his $60,000 income. (His employer matches Willy's contribution dollar for dollar.) Willy's contributions are tax deductible (i.e., deducted from his taxable income) and he is in the 25% federal income tax bracket. How much less does Willy pay in federal income taxes that year compared to a co-worker who makes the same salary but does not participate in the 401(k) plan?

$500

$1000

$2000

$3000

$4000