Suppose you have $2, 000 and plan to purchase a 10-year certificate of deposit (

Question

Suppose you have $2, 000 and plan to purchase a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. How much will you have when the cd matures? $3.754.27 $3, 941.99 $4, 139.09 $4, 346.04 $4, 563.34 How much would $20, 000 due 50 years be worth today it the discount rate were 7.5%? $438.03 $461.08 $485.35 $510.89 $537.78 How much would $5, 000 due 25 years be worth today if the discount rate were 5.5%? $1, 067.95 $1, 124.16 $1, 183.33 $1, 245.61 $1, 311.17 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? $1, 928.78 $2, 030.30 $2, 131.81 $2, 238.40 $2, 350.32 Sunned an Exxon Corporation bond will pay $4, 500 ten years from now. if the interest rate on safe 10-year bonds is 4.25%, how much is the bond worth today $2, 819.52 $2, 967.92

Explanation / Answer

Question 16)

The amount which you have when Certificate of deposit (CD) matures = 2000 * (1 + 0.065)10

  The amount which you have when Certificate of deposit (CD) matures = 2000 * (1.065)10

   The amount which you have when Certificate of deposit (CD) matures = 2000 * 1.87714

   The amount which you have when Certificate of deposit (CD) matures = $ 3754.27 [Option a]

Conclusion:- Option a) $ 3754.27

Question 17)

The present value of $ 20000 due in 50 years if discount rate were 7.5 % = 20000 * Present value factor for 50TH year @ 7.5 %

  The present value of $ 20000 due in 50 years if discount rate were 7.5 % = 20000 * 0.026889

   The present value of $ 20000 due in 50 years if discount rate were 7.5 % = $ 537.78 {Option e}

Conclusion:- Option e) $ 537.78

Question 18)

The present value of $ 5000 due in 25 years if discount rate were 5.5 % = 5000 * Present value (P.V.) factor for 25TH year @ 5.5 %

  The present value of $ 5000 due in 25 years if discount rate were 5.5 % = 5000 * 0.262234

   The present value of $ 5000 due in 25 years if discount rate were 5.5 % = $ 1311.17 [Option e]

Conclusion:- Option e) $ 1311.17

Question 19) The worth of bond today = 2500 * P.V. factor for 5TH year @ 4.25 %

  The worth of bond today = 2500 * 0.812119

   The worth of bond today = $ 2030.30 {Option b}

Conclusion:- Option b) $ 2030.30

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