Calculation Of Present Value And Internal Rate Of Return

Question

1. What is the present value (PV) of an investment that will pay \$4000 in one year’s time and \$400 every year after that, when the interest rate is 5% per year?

A. \$2400
B. \$3600
C. \$7200
D. \$8000

2. You are considering investing in a zero-coupon bond that will pay you its face value of \$1000 in ten years. If the bond is currently selling for \$485.20, then the internal rate of return (IRR) for investing in this bond is closest to:

A. 12%
B. 8.0%
C. 7.5%
D. 10%

Summary

These short questions belong to Finance. The 1st question is about calculating the present value of an investment. The 2nd question is about calculating the internal rate of return for a zero-coupon bond.

Total Word Count 17

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