Question

7.3. Tara purchases a 20-year, 5 percent savings bond with a face value of $10,000 at a premium price of $11,000. She gets the dividend paid yearly. Determine the rate of return on the bond if the bond is kept till maturity. A) 3.79% B) 4.62% C) 5.33% D) 2.38% 7.4. Pam promises to pay Sandy $4,000 in year 4 and another $6,000 in year 8 for a loan of $4,000 from Sandy today. What is the ROR that Sandy is getting? Assume interest is compounded monthly. A) 14.75% B) 16.72% C) 15.39% D) 18.08% 7.5. An equipment costing $60,000 is being evaluated for a production process at Don Jones Co. The expected benefits per year is $4,500 and estimated salvage value is $20,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 20 years. A) 4.92% B) 5.96% Year 0 1-2 3-5 Cash flow -$12,300 4,000 3,000 C) 5.62% D) 4.18%

          7.3. Tara purchases a 20-year, 5 percent savings bond with a face value of $10,000 at a premium
price of $11,000. She gets the dividend paid yearly. Determine the rate of return on the bond if the
bond is kept till maturity.
A) 3.79%
B) 4.62%
C) 5.33%
D) 2.38%
7.4. Pam promises to pay Sandy $4,000 in year 4 and another $6,000 in year 8 for a loan of $4,000
from Sandy today. What is the ROR that Sandy is getting? Assume interest is compounded monthly.
A) 14.75%
B) 16.72%
C) 15.39%
D) 18.08%
7.5. An equipment costing $60,000 is being evaluated for a production process at Don Jones Co. The
expected benefits per year is $4,500 and estimated salvage value is $20,000. Determine the rate of
return the company can get in this equipment proposal. Equipment life = 20 years.
A) 4.92%
B) 5.96%
Year 0 1-2 3-5
Cash flow -$12,300 4,000 3,000
C) 5.62%
D) 4.18%

Added by Jennifer W.

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