1. A Florida state savings bond can be converted to $1000 at maturity five years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 1% interest compounded annually, at what price will the state bonds sell, assuming they make no cash prior to maturity?
2. Referring to problem above, at what price would the bond sell if U.S. savings bonds were paying 1.5% interest compounded annually? Compare your answers to that of the preceding problem.