Suppose that you buy a two-year 6.9% bond at its face value.

a-1.	What will be your nominal return over the two years if inflation is 1.9% in the first year and 3.9% in the second?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Nominal return

%

a-2.	What will be your real return?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Real return

%

b.	Suppose that the bond is a TIPS. What will be your real and nominal returns?(Do not round intermediate calculations. Round your answers to 2 decimal places.)

Real return	%
Nominal return	%

Siegfried Basset is 65 years of age and has a life expectancy of 14 more years. He wishes to invest $20,500 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8.5%, what income can Mr. Basset expect to receive each year?

The one-year spot interest rate isr₁= 5.6% and the two-year rate isr₂=6.6%. If the expectations theory is correct, what is the expected one-year interest rate in one years time?

What is the PV of $110 received in year 5 (at a discount rate of 2%)?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

b.	What is the PV of $110 received in year 5 (at a discount rate of 14%)?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

c.	What is the PV of $110 received in year 10 (at a discount rate of 26%)?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

d.	What is the PV of $110 received in each of years 1 through 3 (at a discount rate of 13%)?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

At an interest rate of 12%, the six-year discount factor is 0.507. How many dollars is $0.507 worth in six years if invested at 12%?(Do not round intermediate calculations.Round your answer to the nearest dollar amount.)

An investment costs $1,548 and pays $138 in perpetuity. If the interest rate is 9%, what is the NPV?(Negative amount should be indicated by a minus sign.Do not round intermediate calculations.Round your answer to 2 decimal places.)