1. You plan to contribute $1,200 each year to your nephew’s college education. He will graduate from high school in 10 years. Interest rates are 6%. Calculate how much money you should have saved for him by the time he is ready to go to college using the following methods:
a. Long-hand
b. Financial calculator
c. Tables provided in the appendix
d. Spreadsheet
2. Which statement is true and which one is false. Explain in 2 lines max.
a. Interest rate on a 20-year mortgage is higher than the interest rate on a 30-year mortgage.
b. Interest rate on credit card debt is higher than the interest rate on a mortgage.
c. Interest rate on a AAA corporate bond is lower than interest rate on a BB corporate bond with the same maturity.
d. Interest rate on a AAA corporate bond with 1 year until maturity is necessarily higher than interest rate on a 10-year treasury bond