13) You invest $15,000 at an annual rate of 8.25% for one year. What is the diff
ID: 2701591 • Letter: 1
Question
13) You invest $15,000 at an annual rate of 8.25% for one year. What is the difference in interest earned if you invest this money on a monthly basis instead of an annual basis?
Answer: Show your work
20) You know that regular tax-deferred investments are a popular investment choice for many people preparing for retirement. Did you know that if you invest $2,000 today and at the end of every year for 40 years at an annual rate of 10% that you will have grown your portfolio to a value of $975,704 at the end of that time? How much of that future value dollar amount comes from the $2,000 investment you made today?
A) $975,704
B) $885,185
C) $23,798
D) $90,519
Answer: Show your work
24) RC Inc. just issued zero-coupon bonds with a par value of $1,000. If the bond has a maturity of 15 years and a yield to maturity of 10%, what is the current price of the bond if it is priced in the conventional manner?
A) $1,000
B) $239.39
C) $231.38
D) This question cannot be answered because the coupon payment information is missing.
Answer: Show your work
26) Snake River Power Inc. has $1,000 par value, twenty-year, 6% annual coupon bonds, outstanding currently selling for $696.25. What is the yield to maturity on these bonds? Use a calculator for your answer.
Answer: Show your work
29) Your investment advisor informs you that you do not need to pay a fee for his services. Instead, he invests your money for one month and keeps all of the proceeds before investing it for you. If your advisor makes and keeps a 2% return on your investment, what is his EAR if the earnings rate could be extrapolated for one year?
A) 2.00%
B) 24.00%
C) 26.82%
D) 126.82%
Answer: Show your work
Explanation / Answer
13)
difference is 15000 * ( 1 + 0.0825/12 )^12 - 15000 * 1.0825 = $47.88
20)
2000 * ( 1.1 )^40 = D) $90,519
24) 1000 / 1.1^15 = B) $239.39
26) using a calculator available online its 10.59
29)
EAR is 100 * ( 1.02^12 - 1 ) = C) 26.82%
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