Suppose you have a $1000 investment that will return $2700 in 5 years. There is a similar investment of equivalent risk that will return $2550 in 5 years. You also have another $1000 investment that is risk free that will return $1085 in 5 years. The yield on a 5 year treasury is 1.27%. What is the opportunity cost of capital for each investment? If I were to finance the investment, what borrowing rate would each break-even? Are both of the investments better than those of similar risk?

Assume you are evaluating two bonds that were issued 2 years ago at par ($1000). Bond A is a 30 year bond with a 6% coupon, paid semi-annually. Bond B is a 15 year bond with a 6% coupon rate, paid semiannually. Interest rates have since risen to 8%. Calculate the current prices for each of the bonds. Which one would have been the better bond to have bought two years ago, assuming you had to pick one?

If I am quoted a savings rate of 3.35% EAR, how much will I be able to save in 10 years if I make quarterly payments into my account of $300? What if the quote was 3.5% APR compounded quarterly instead?