Question

# Question 2 2a) Suppose a risk-free bond promises to pay \$2,249.73 in 4 years.  If the going...

 Question 2 2a) Suppose a risk-free bond promises to pay \$2,249.73 in 4 years.  If the going risk-free interest rate is 3.5%, how much is the bond worth today? Nper Rate PMT FV PV 2b) Suppose you can buy a U.S. Treasury bond which makes no payments until the bond matures 10 years from now, at which time it will pay you \$1,000. What interest rate would you earn if you bought this bond for \$585.43? Nper PMT PV FV Rate = 2c) A company's 2013 earnings per share were \$2.75, and its growth rate during the prior 10 years was 16.35% per year.  If that growth rate were maintained, how long would it take for EPS to become three (3) times as large? Rate PMT PV FV Nper = years 2d) Assume that you plan to buy a condo 5 years from now, and you need to save for a down payment.  You plan to save \$2,500 per year, with the first payment being made immediately and deposited in a bank that pays 4%.  How much will you have after 5 years? Nper Rate PV PMT FV

Q2

Nper = 4
Rate = 3.5%
PMT = 0
PV = Cpmpute PV => PV = 1960.51 Answer
FV = 2249.73

Q2b

NPER = 10

PMT =0

PV = -585.43

FV = 1000

Rate = Compute Rate => Rate = 5.50% Answer

Q2c

Rate = 16.35%

PMT = 0

PV = -2.75

FV = 2.75*3 =8.25

NPER = Compute NPER => NPER = 7.25 Answer

Q2d

NPER =5

Rate = 4%

PV =0

PMT =2500

FV = Compute FV => FV = 14082.44 Answer

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