question1:

-A companys 5-year bonds are yielding 19.3% per year. The real risk-free rate (r*) is 2.3%. The inflation premium is 2.4%, the liquidity premium is 1.3%, and the default risk premium is 0.9%. What is the maturity risk premium on the corporate bonds? *

a) 0.5%

b) 1.4%

c) 2.7%

d) 3.3%

e) None of the above

-An investment has two options: 1) The first option includes annual payments of $1000, $1100, and $2200 at the end of each of the next three years, respectively. 2) The other option is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 10 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer? *

a) 2719

b) 3300

c) 3000

d) 2479

e) None of the above

-You want to quit your job and go back to school for a law degree 4 years from now, and you plan to save $3,600 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. How much will you have 4 years from today? *

a) $15,112

b) $16,112

c) $17,112

d) $21,250

e) None of the above

-Find the present value of an ordinary annuity with payments of $500 a year for 5 years, if interest rates are 8% compounded semiannually. *

a) $1996.36

b) $1701.46

c) $2993.30

d) $1656.06

e) None of the above