Question 1: Retirement Savings.
You believe you will need to have saved $500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6% per year, how much must you save each year until retirement to meet your retirement goal?
Question 2: Bond Yields.
An AT&T bond has 10 years until maturity, a coupon rate of 8% and sells for $1,100.
a. What is the current yield on the bond?
b. What is the yield to maturity?
Question 3: A General Motors bond carries a coupon rate of 8%, has 9 years until maturity and sells at a yield to maturity of 7%.
a. What interest payments do bondholders receive each year?
b. At what price does the bond sell? (Assume annual interest payments.)