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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
discuss the impact of each of the factors on your opinion. Offer some logic or current reference(s) to support your answer. Which factor do you think will have the biggest impact on interest rates?
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