1. An investor holds two bonds, one with 5 years until maturity and the other with 20 years until maturity. Which of the following is more likely if interest rates suddenly increase by 2%?
The 20-year bond will decrease more in price.
The 5-year bond will decrease more in price.
Both bonds will decrease in price by the same proportion.
Neither bond will decrease in price, but their yields will increase.
2. In each case find the value of the annuities at December 31, 2017 using 7% interest.
a) Payments of $30,000 per year paid quarterly starting on January 1, 2018.
b) Payments of $48,000 per year paid at the start of each month from 2009-2017.
c) Payments of $2500 made every June 30 and December 31 from 2003-2017.
d) Payments of $5000 made every two months starting on February 28, 2018 and ending on December 31, 2024.