# Multiple Finance Questions

Anonymous

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Question 1) Interest rate is 4%. What is PV of 10 year ordinary annuity of 1,000 pear year plus additional 5,000 at end of year 6? Question 2) I got 1,000 dollars. I invested it at 5.00% per year, how much can I withdraw after 20 years? Question 3) What is current price of a zero coupon bond with 200\$ face value, maturing in 2 years with quoted rate of 3%. Annual Compounding? Question 4) Where do I get lowest rate of return? 8% nominal interest rate with monthly compounding, 7% nominal interest rate with daily compounding, 7% nominal interest monthly compounding, or 8% interest nominal daily compounding. Question 5) Business A costs 600,000 making anually 40,000 indefinetly. Cash flow of 40,000 is recieved at end of every year, with first cash flow occuring the next year. Business B is simialir, except that cash flow of 40,000 is recieved at the start of every year, with first cash occur right away. (perpetuity grows with every flow). If I wanted 10% return on the investment, which is true of the statements below? OPTIONS: i) Cash flow of Business A MUST be 4.33 growing anually ii) Not possible to determine with data iii) Both businesses require the same annual growth of 3.33% iv) Cash flows of Buisness B requires lower annual frowth rate than former, at 2.67% Question 6) I can buy annuity that pays 200 dollars for every year for 5 years. I could earn 7% on my money in other investments with equal risk. What is hte msot I should pay for the annuity. Question 7) Two Bonds are outstanding. Bond 1 was issued 10 years ago with coupon rate of 8%. Bond 2 was issued 5 years ago with coupon rate of 5%. Both bonds have 30 years terms and face value of 600\$. THe going interest rate is 10% today. If it is a semi-annual coupon payment, was are the said prices of the two bonds at this time.

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