Problem:
1. What is the present value (PV) of an investment that will pay $4000 in one year's time and $400 every year after that, when the interest rate is 5% per year?
A. $2400
B. $3600
C. $7200
D. $8000
2. You are considering investing in a zero-coupon bond that will pay you its face value of $1000 in ten years. If the bond is currently selling for $485.20, then the internal rate of return (IRR) for investing in this bond is closest to:
A. 12%
B. 8.0%
C. 7.5%
D. 10%
Summary of question:
These short questions belong to Finance. The 1st question is about calculating the present value of an investment. The 2nd question is about calculating the internal rate of return for a zero-coupon bond.