Reference no: EM132518021

Question 1: Investor A has gained an X amount. He decided to deposit this amount in a bank account for 5 years. The bank offers a rate of 8% compounded monthly. The value accumulated in his account after 5 years is $19,000. What was the initial value gained by investor A?

a) 12931

b) 12753

c) 17592

d) 3800

Question 2: Ted invests $1,400 at the end of each year for 7 years into an account that pays 6% compounded annually. What is the value of the investment at the end of the investment period?

a) 12456

b) 2105

c) 11751

d) 14000

Question 3: You are due to receive $1000 for 6 years at the end of each year from an insurance company. Interest rate in the market for comparable investment is 5%. If the insurance company has to pay you the total amount as of today, what will be the equivalent amount?

a) 4477

b) 4212

c) 5075

d) 5329

Question 4: An investment has two options: 1) The first option includes annual payments of $1000, $1100, and $1200 at the end of each of the next three years, respectively. 2) The other option is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 10 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer?

a) 2719

b) 3300

c) 3000

d) 2479

Question 5: You are 25 years old today and you plan to retire on your 45th birthday. You targeted saving plan at your retirement is $300,000. You can actually invest at 8% compounded semi-annually. How much should you deposit today in your bank account to accumulate $300,000 at your retirement year?

a) 136916

b) 64364

c) 13809

d) 62486

Question 6: What is the yield on a 6-year bond for this Corporation?

a) 4.83%

b) 8.93%

c) 8.43%

d) 12.2%

Question 7: What is the yield on a 4-year Treasury bond?

a) 7.5%

b) 8.4%

c) 9.3%

d) 8.9%

Question 8: What is the Liquidity premium on a 6-year Treasury bond?

a) 0.9%

b) 0.5%

c) 0%

d) 0.6%

Question 9: What is the Inflation premium on an 8-year Treasury bond?

a) 6.83%

b) 6%

c) 0%

d) 5.125%

Question 10: A 7-year corporate bond has a yield of 9.5%. The default risk premium is 1.2% and liquidity premium is 0.4%. What would be the yield on a 7-year Treasury bond?

a) 7.9%

b) 9.5%

c) 11.1%

d) 8.3%