1. Your grandfather is about to retire, and he wants to buy an annuity that will provide him with $80,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?
a. $955,507.24
b. $1,202,089.76
c. $1,027,427.14
d. $1,243,186.84
e. $1,058,249.96
2. Roth, Inc. issued convertible bonds at their $1,000 par value 5 years ago The bonds currently sell for $1,050. The bonds still have the same AA rating. Since the bonds were issued:
A Market interest rates have increased
B The bonds are selling at a discount
C The bonds are selling at par
D The bonds are selling at a premium
E None of the above