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Calculation Of Present Value And Internal Rate Of Return


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%


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.

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