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1.  Revris Credit Union offers to lend you $40,000 at a nominal rate of 7.5%, compounded monthly.  The loan (principal plus interest) must be repaid at the end of the year.  South Commercial Bank also offers to lend you the $40,000, but it will charge an annual rate of 8.0%, with no interest due until the end of the year.  How much higher or lower is the effective annual rate charged by South Commercial Bank versus the rate charged by Revris Credit Union?(1.5 points)

2.  At a rate of 7.5%, what is the future value of the following cash flow stream?

Years:  0  1  2  3  4

  |  |  |  |  |

CFs:  $0  $75  $225  $0  $300

(1.5 points)

3.  Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%.  Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%.  What is the default risk premium on corporate bonds? (1 point)

4.  Silus Inc. is considering a project that has the following cash flow and WACC data.  What are the project's payback, discounted payback, NPV, and MIRR?(4 points)

WACC:  10.00%

Year    0  1  2  3  4 

Cash flows  -$950  $525  $485  $445  $405