1. You are considering purchasing a bond on the secondary market that pays annual coupons, has 30 years to maturity, and a par value of $10,000. The coupon rate is 7% and the yield to maturity is 10%. What is the price of this bond?
a. $1232.97
b. $717.19
c. $7,171.93
d. $10,700
2. You are deciding between keeping your old car and buying a new car. If you sold your old car today you would receive $3,000 and that value will fall by $750 per year. The cost to maintain the car was $500 last year and will increase by $200 this year. What is your current opportunity cost of keeping the old car one more year?
a. $3,500
b. $3,000
c. $2,250
d. $3,750