1) A bond has a face value of $1,000, has 5 years until maturity, and an annual coupon rate of 7%? It yields 5% currently. By how much will the price change over the next year if the yield remains constant?
a) rise by $15.67
b)decline by 15.67
c) decline by 86.59
d) zero.
2) A car's price is currently $20,000 and is expected to rise by 4% a year. If the interest rate is 6%, how much do you need to put aside today to buy the car one year from now?
a) $18,182
b) $19,231
c) $19,263
d) $14,085