Question 5
Suppose that there is a bond that will pay $500 for each of the next three years (the first payment is one year from now). At the end of three years the bond matures and the holder receives the $10,000 face value of the bond. If the market rate is 4%, what is the present value of the bond?
Answer
9,867.44
10,277.21
11,123.22
11,687.17
10 points
Question 6
Suppose that you currently have $2000 deposited in a savings account that earns 1.25% interest. Approximately, how many years must you wait before you have $4000?
Answer
10
24
32
56
10 points
Question 7
Suppose that Manisa Co. is currently not paying any dividends, but is is known that starting in four years (i.e. the first payment is four years from now), Manisa will begin paying $2 a share. The interest rate is 4%. In three years time, what will be the price of Manisa Co. shares?
Answer
37.50
48.07
50
75