1. A 5 year semiannual coupon bond with a face value of $1000 trades at $860. The market-determined discount rate is 5%. What is the coupon rate?Suppose you save $2,000 per year at the end of every year for the next 30 years. a. How much will you have at the end of the 30 years if you can earn 9% on your money? b. What if you had saved at the beginning of the year instead?
2. Assume Social Security is still solvent when you retire. You can retire at age 62 and receive $2,000 per month, or you can wait until age 70 and receive $3,500 per month. Assuming your life expectancy is to age 82, which option should you choose? Assume the appropriate discount rate is 5%.