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Question(s) / Instruction(s):

Show how you work them out. Ex # 1 FV=10,000 (1+.04)5

1. What is the future value of $10,000 invested in a 5 year Certificate of Deposit at 4% p.a., interest compounded semi-annually at the end of 5 years, assuming that the interest and principal are both paid at maturity?

2. What is the cost (i.e. present value) of a Zero Coupon Bond paying $1,000.00 at the end of 10 years assuming that the going rate of interest is 10% p.a. and a quarterly compounding?

3. What is the present value of a 15-Year, $1,000,000, 10%, interest paid semi-annually, Corporate Bond Issue on October 1, 2002 that matures on October 1, 2017 assuming that prevailing rate of interest in the market on such bond issues now is 8%.

4. Will the Bonds in the issue described in #3 above be selling at a premium or discount? If so, how much?

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