Finance

1.      A $10,000 bond that matures in 20 years with interest at 8% per year payable quarterly was issued 4 years ago. If the bond is purchased now for $10,000 and held to maturity, what will be the effective rate of return per quarter to the purchaser? (a) 2% (b) 2.02% (c) 4% (d) 8%

2.      A $10,000 mortgage bond that is due in 20 years pays interest of $250 every 6 months. The bond interest rate is closest to (a) 2.5% per year, payable quarterly (b) 5.0% per year, payable quarterly (c) 5% per year, payable semiannually (d) 10% per year, payable quarterly

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When positive net cash flows are generated before the end of a project, and when these cash flows are reinvested at an interest rate that is greater than the internal rate of return,

(a) The resulting rate of return is equal to the internal rate of return.

(b) The resulting rate of return is less than the internal rate of return.

(e) The resulting rate of return is equal to the reinvestment rate of return.

(d) The resulting rate of return is greater than the internal rate of return.

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