What rate of return will your friend make on the investment

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Reference no: EM132011763

1. One of your friends purchased a zero coupon corporate bond (i.e., a bond that has no interest payments) for $4,850. The bond has a face value of $25,000 and is due in 15 years. If the bond is held to maturity, what rate of return will your friend make on the investment?

a. 11.55%

b. 415.00%

c. 8.07%

d. The rate of return cannot be calculated with the information given.

2. The State of Georgia decided to fund a program for restoring and maintaining local museums. The first cost is $250,000 now, and an additional cost of $80,000 every 8 years forever. The perpetual equivalent annual worth (in years 1 through infinity) of this program at an interest rate of 20% per year is equal to: **The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places**

a. -$31,996

b. -$130,000

c. -$54,849

d. -$70,001

Reference no: EM132011763

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