Reference no: EM13924926
1. Find the interest rate (or rates of return) for each of the following situations. Round your answers to two decimal places.
a) You borrow $65,000 and promise to pay back $180,547 at the end of 14 years.
b) You borrow $10,000 and promise to make payments of $2,445.7 at the end of each year for 5 years.
2. Find the present value of the following ordinary annuities. Round your answers to the nearest cent.
payments are made at the beginning of each year; that is, they are annuities due.
a) $800 per year for 10 years at 8%.
b) $400 per year for 5 years at 4%.
3. The real risk-free rate of interest is 3%. Inflation is expected to be 1% this year and 6% during the next 2 years. Assume that the maturity risk premium is zero.
a) What is the yield on 3-year Treasury securities? Round your answer to two decimal places.
4. The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
a) What will be the value of each of these bonds when the going rate of interest is 14%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
What is Bond L? ______
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