1. You have the opportunity to borrow money at an interest rate of 10% per annum, compounded annually. You want to make 10 payments (at the end of years 1 through 10) of 1000 dollars each (and you want the loan to be fully paid off by the final payment). How much should you borrow?
2. If you purchase a zero coupon bond from Newman’s Postal Delivery today for $375 and it matures at $1,000 in 11 years, what rate of return will you earn on that bond?