1. To what amount will the following investment accumulate?

$905, invested today for 4 years at 7 percent, compounded annually.

2. Your mother has been working in a small bookstore for many years. Her sales in the first year were $28,109, and her sales in the last year were $54,207. If the sales grew at an average rate of 2.34 percent per year, how many years did your mother sell books in her bookstore?

3. At what annual rate would the following have to be invested?

$3,795, to grow to $65,800, in 29 years.

4. What is the accumulated sum of the following stream of payments?

$1,482 every year at the end of the year for 11 years at 8.89 percent, compounded annually.

5. You have accumulated some money for your retirement. You are going to withdraw $65,015 every year at the end of the year for the next 16 years. How much money have you accumulated for your retirement? Your account pays you 8.19 percent per year, compounded annually. To answer this question, you have to find the present value of these cash flows.

6. You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 5.4 percent, compounded annually.

7. You have accumulated $797,954 for your retirement. How much money can you withdraw for the next 17 years in equal annual end-of-the-year cash flows if you invest the money at a rate of 16.15 percent per year, compounded annually?

8. What is the present value of a $933 perpetuity discounted back to the present at 14.00 percent.

9. Bright Star Bank pays a nominal annual (quoted) interest rate of 9.73 percent, compounded quarterly on your savings account. Calculate the effective annual rate, or EAR (annual percentage yield).

10. Assume that the inflation rate during the last year was 1.91 percent. US government T-bills had the nominal rates of return of 4.29 percent. What is the real rate of return for a T-bill?

11. You plan to buy a house in 13 years. You want to save money for a down payment on the new house. You are able to place $328 every month at the end of the month into a savings account at an annual rate of 3.59 percent, compounded monthly. How much money will be in the account after you made the last payment?

12. You have decided to place $442 in equal deposits every month at the beginning of the month into a savings account earning 7.23 percent per year, compounded monthly for the next 12 years. The first deposit is made today. How much money will be in the account at the end of that time period?

13. You plan to buy the house of your dreams in 13 years. You have estimated that the price of the house will be $66,781 at that time. You are able to make equal deposits every month at the end of the month into a savings account at an annual rate of 3.55 percent, compounded monthly. How much money should you place in this savings account every month in order to accumulate the required amount to buy the house of your dreams?

14. What is the present value of the following annuity?

$4,748 every half year at the end of the period for the next 9 years, discounted back to the present at 19.99 percent per year, compounded semiannually.

15. To what amount will the following investment accumulate?

$905, invested today for 4 years at 7 percent, compounded annually.

16. Assume that today’s date is February 15, 2015. Robin Hood Inc. bond is an annual-coupon bond. **Par value of the bond is $1,000.*** ** *How much you will pay for the bond if you purchased the bond today? *The answer should be calculated to two decimal places*

17. ** **

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Robin Hood | 89.318 | 9.970 | 2-15- 2035 | – | – | D |

18. Assume that today’s date is February 15, 2015. Robin Hood Inc. bond is an annual-coupon bond. **Par value of the bond is $1,000.*** ** *Calculate annual coupon interest payments.

** ***The answer should be calculated to two decimal places*

** **

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Robin Hood | 112.023 | 6.980 | 2-15- 2031 | – | – | D |

19. Assume that today’s date is February 15, 2015. Robin Hood Inc. bond is an annual-coupon bond. **Par value of the bond is $1,000.*** ** *Calculate the bond’s current yield.

** ***Round the answers to two decimal places in percentage form. **(Write the percentage sign in the “units” box)**.*

** **

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Robin Hood | 96.053 | 8.253 | 2-15- 2024 | – | ? | D |

20. . Assume that today’s date is April 15, 2015. Fresh Bakery Inc. bond is an annual-coupon bond. **Par value of the bond is $5,000.**

How much you will pay for the bond if you purchased the bond today? *The answer should be calculated to two decimal places*

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Fresh Bakery | 99.827 | 9.836 | 04-15- 2038 | – | – | AA |

21. Assume that today’s date is April 15, 2015. Fresh Bakery Inc. bond is an annual-coupon bond. **Par value of the bond is $5,000.**

Calculate the bond’s current yield.

** ***Round the answers to two decimal places in percentage form. **(Write the percentage sign in the “units” box)**.*

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Fresh Bakery | 91.326 | 5.407 | 04-15- 2026 | – | ? | AA |

22. Assume that today’s date is April 15, 2015. Fresh Bakery Inc. bond is an annual-coupon bond. **Par value of the bond is $5,000.**

Calculate annual coupon interest payments. *The answer should be calculated to two decimal places*

Company |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |

Fresh Bakery | 122.053 | 5.072 | 04-15- 2031 | – | – | AA |

23. What is the yield to call of a 30-year to maturity bond that pays a coupon rate of 17.13 percent per year, has a $1,000 par value, and is currently priced at $1,162? The bond can be called back in 6 years at a call price $1,085. Assume annual coupon payments.

24. Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 14.45 percent coupon rate and paid interest annually. It is now 6 years later. The current market rate of interest on the Bright Sun bonds is 12.17 percent. What is the current market price (intrinsic value) of the bonds?

25. 11 years ago, Delicious Mills, Inc. issued 30-year to maturity bonds that had a 10.77 percent annual coupon rate, paid semiannually. The bonds had a $1,000 face value. Since then, interest rates in general have changed and the yield to maturity on the Delicious Mills bonds is now 12.87 percent. Given this information, what is the price today for a Delicious Mills bond?

26. Dan is considering the purchase of Super Technology, Inc. bonds that were issued 10 years ago. When the bonds were originally sold they had a 20-year maturity and a 10.51 percent coupon interest rate, paid annually. The bond is currently selling for $1,297. Par value of the bond is $1,000. What is the yield to maturity on the bonds if you purchased the bond today?

27. Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 11 years and a yield to maturity of 14.39 percent, compounded semi-annually. What is the current price of the bond?

28. Black Water Corp. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 24 years and a yield to maturity of 11.65 percent, compounded annually. What is the current price of the bond?

29. 18 years ago, Mini Max Inc. issued 30 year to maturity zero-coupon bonds with a par value of $1,000. Now the bond has a yield to maturity of 10.14 percent, compounded semi-annually. What is the current price of the bond?

30. 26 years ago, Blue Lake Corp. issued 30 year to maturity zero-coupon bonds with a par value of $5,000. The current interest rate on this type of bond is 13.79 percent, compounded annually. What is the current price of the bond?

31. What is the yield to maturity of a 23-year bond that pays a coupon rate of 7.05 percent per year, has a $1,000 par value, and is currently priced at $1,487? Assume annual coupon payments.

32. Blue Crab, Inc. plans to issue new bonds, but is uncertain how the market would set the yield to maturity. The bonds would be 11-year to maturity, carry a 8.77 percent annual coupon, and have a $1,000 par value. Blue Crab, Inc. has determined that these bonds would sell for $834 each. What is the yield to maturity for these bonds?

33. Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $788. It has an annual coupon rate of 10.71 percent, paid semiannually, and has 30-years remaining until maturity. What would the annual yield to maturity be on the bond if you purchased the bond today and held it until maturity?

34. A few years ago, Spider Web, Inc. issued bonds with a 6.49 percent annual coupon rate, paid semiannually. The bonds have a par value of $1,000, a current price of $1,020, and will mature in 13 years. What would the annual yield to maturity be on the bond if you purchased the bond today?

35. General Mills has a $1,000 par value, 22-year to maturity bond outstanding with an annual coupon rate of 11.24 percent per year, paid semiannually. Market interest rates on similar bonds are 9.70 percent. Calculate the bond’s price today.

36. Pet Food Company bonds pay an annual coupon rate of 8.05 percent. Coupon payments are paid semiannually. Bonds have 28 years to maturity and par value of $1,000. Compute the value of Pet Food Company bonds if the market interest rate on this type of bond is 10.93 percent.

37. Flower Valley Company bonds have a 12.01 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 30 years from now. Compute the value of Flower Valley Company bonds if investors’ required rate of return is 9.40 percent.

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