Time Value of Money

Question 1

0.5 out of 0.5 points

Suppose a U.S. treasury bond will pay $2,500 five years from now. If the going interest rate on 5-year treasury bonds is 4.25%, how much is the bond worth today?

Answer

Selected Answer:

b. $2,030.30

Correct Answer:

b. $2,030.30

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Question 2

0.5 out of 0.5 points

You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Answer

Selected Answer:

e. $6,744.83

Correct Answer:

e. $6,744.83

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Question 3

0.5 out of 0.5 points

Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

Answer

Selected Answer:

a. $1,781.53

Correct Answer:

a. $1,781.53

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Question 4

0.5 out of 0.5 points

Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.5%, how much is the bond worth today?

Answer

Selected Answer:

a. $585.43

Correct Answer:

a. $585.43

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Question 5

0.5 out of 0.5 points

You want to buy a new ski boat 2 years from now, and you plan to save $8,200 per year, beginning one year from today. You will deposit your savings in an account that pays 6.2% interest. How much will you have just after you make the 2nd deposit, 2 years from now?

Answer

Selected Answer:

c. $16,908

Correct Answer:

c. $16,908

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Question 6

0.5 out of 0.5 points

How much would $100, growing at 5%...