Number 1.

Andrea and Giras, who are twins, get each one IDR 75,000 for their 22nd birthday. These twin brothers dream of becoming a millionaire. Each of them plans to save IDR 5,000 per year for early retirement fund which will start on birthday their year, today. Andrea invests in a high-quality bond that investors have earned a 4.5% annual rate of return based on historical data. Giras invests in newly issued biotechnology stocks and historically the investors of the company have earned an average rate of return in the form of dividends of 17.25% per year. a. If each twin gets the same rate of return as the rate of return obtained by each investor company in previous years, at what age did Andrea and Giras become a millionaire? b. Due to the different rates of return that Andrea and Giras get, how much annual savings must Andrea add to become a millionaire at the same age as Giras? c. What do you think about Andrea's decision to invest more? in bonds versus stocks? Are there any risks that Giras will face?

Number 2.

An investor has two bonds in his portfolio with a face value of IDR 1,000 and pay an annual coupon of 15% at the end of each year. Bond A falls maturity in 10 years, and bond B is due in 1 year. a. What is the value of each bond if market interest rates are 6%, 9%, and 12%? Assuming interest payments will be paid once on Bond B at maturity, and 10 times on bond A. b. Why do long-term bond prices have a higher variation compared to the price of short-term bonds when interest rates change? c. Why can bonds be sold at a discount or premium?