1. You are offered an investment with returns of $ 1,288 in year 1, $ 3,680 in year 2, and $ 5,084 in year 3. The investment will cost you $ 8,586 today. If the appropriate Cost of Capital (quoted interest rate) is 12.5 %, what is the Profitability Index of the investment?
2. A Treasury bond is quoted as 119:16 ask and 119:12 bid. What is the bid-ask spread (i.e. ask price – bid price) in dollars on a $10,000 face value bond?