1. Comparing Investments Investment A generates $1000 at the end of each year for 10 years. Investment...

Question:

1. Comparing Investments Investment A generates $1000 at the end of each year for 10 years. Investment B generates $5000 at the end of the fifth year and $5000 at the end of the tenth year. Assume a market rate of interest of 2.5% compounded annually. Which is the better investment?
2. Bond Value A 5-year bond has a of $1000 and is currently selling for $800. The bond pays $5 interest at the end of each month and, in addition, will repay the $1000 at the end of the fifth year. The market rate of interest is currently 4.8% compounded monthly. Is the bond a bargain? Why or why not?
3. Effective Rate Calculate the effective rate for 2.2% interest compounded semiannually.
4. Effective Rate Calculate the effective rate for 2.7% interest compounded monthly?
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...