1. Why does present value decrease as the discount rate increases?
2. You deposit $1,300 in a bank account that pays 5% stated annual interest compounded monthly. What is the value of your investment at the end of 8 years?
Please round your answer to the nearest cent.
3. A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 5% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years?
Please round your answer to the nearest cent.