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 $SO,OOO corporate bond due in 20 years with an interest rate of 10% per year, payable quarterly, is for sale for $SO,OOO. If an investor purchases the bond and holds it to maturity, the rate of return wiII (a) Nominal 10% per year, compounded quarterly (b) 2.S% per quarter (c) Both (a) and (b) are correct (d) Effective 10% per year

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1.      If alternative A has a rate of return of 10% and alternative B has a rate of return of 18%, what is known about the rate of return on the increment between A and B if the investment required in B is (a) larger than that required for A and (b) smaller than that required for A?

2.      What is the overall rate of return on a $100,000 investment that returns 20% on the first $30,000 and 14% on the remaining $70,000?


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