- Class – Please answer the following problem questions .1. Future value: Your bank pays 5 percent annual interest compounded semiannually on your savings account. You don’t expect to add to the current balance of $2,700 over the next four years. How much money can you expect to have at the end of this period?
2. Present value: You want to buy some bonds that will have a value of $1,000 at the end of seven years. The bonds pay 4.5 percent interest annually. How much should you pay for them today?
3. Effective annual interest rate: Cyclone Rentals borrowed ,550 from a bank for three years. If the quoted rate (APR) is 6.75 percent, and the compounding is daily, what is the effective annual interest rate (EAR)?
4. The Security Market Line: If the expected return on the market is 10 percent and the risk-free rate is 4 percent, what is the expected return for a stock with a beta equal to 1.5? What is the market risk premium
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