1. Rex Corporation is evaluating two mutually exclusive projects: Project A and Project B.

Project A requires an initial investment of $250,000 and is expected to generate cash flows of

$60,000 per year for four years. Project B requires an initial investment of $450,000 and is

expected to generate cash flows of $90,000 per year for four years. Assuming a discount rate

of 10%, which project should Rex Corporation invest in and why?

2. A bond has a face value of $5,000, a coupon rate of 4%, and a maturity of 10 years. The

bond pays interest semi-annually. What is the yield to maturity of the bond if the price is $5,600?

3. A bond has a face value of $1,000, a coupon rate of 7%, and a maturity of 5 years. The bond

pays interest annually. What is the price of the bond if the yield to maturity is 6%?