1. You own a manufacturing business and are considering the purchase of a labor-saving device. You project that the device will last 9 years and save you $1,000 per month in labor costs (assume that the savings are realized at the end of each month). At the end of 9 years, you project you can sell the device for a salvage value of $11,000. Assuming that you can earn 10.5% compounded monthly on your money, what is the value of the device?
a $10,124.82
b $69,682.23
c $9,523.38
d $73,975.31
2. A corporation issues 24-year $1,000 zero-coupon bonds. If you buy one of these bonds you will receive no interest checks during the 24 years, but will receive the $1,000 maturity value in 24 years. Based on a prevailing 9% annual rate, what price must you pay for one of these bonds?
a $794.69
b $334.02
c $144.28
d $126.40