The approximate percentage change in the price of bond

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Reference no: EM131568416

1. Susan saved $5000 per year in her retirement account for 10 years (during age 25-35) and then quit saving. However, she did not make any withdrawal until she turned 65 (i.e., 30 years after she stopped saving). Her twin sister, Jane did not save anything during the 1st 10 years (during age 25-30) but saved $5,000 per year for 30 years (during age 35-65). What will be the difference in their retirement account balance at age 65, if their investments earned an average return of 7.5% during the entire period?

$162,450

$102,289

$53,568

$236,265

2. Consider a 10 year bond with face value $1,000, pays 6% coupon semi-annually and has a yield-to-maturity of 7%. How much would the approximate percentage change in the price of bond if interest rate in the economy decreases by 0.80% per year?

increase by 14.12%

increase by 7.92%

decrease by 7.65%

increase by 6.06%

Reference no: EM131568416

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