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Which would you recommend for your retired parents? Justify
your answer.
·
Five years ago, you purchased a $1,000 corporate bond issued
by General Electric. The interest rate for the bond was 5%.
Comparable bonds are paying 6% today.
o What is the approximate dollar price for which you could sell your
General Electric bond?
o In your own words, describe why your bond decreased in value.
·
Sidney took a $200 cash advance by using checks linked to her
credit card account. The bank charges a 2% cash advance fee on the
amount borrowed and offers no grace period on cash advances. Sidney
paid the balance in full when the bill arrived.
o What was the cash advance fee?
o What was the interest for 1 month at an 18% APR?
o What was the total amount she paid?
o What if she had made the purchase with her credit card and paid
off her bill in full promptly?
·
Retirees often make a choice between the following: What are
the advantages and disadvantages of both.
o 1) taking a lump-sum pension payout and purchasing an annuity
(or having the company convert their benefit to an annuity for them)
or
2) using the lump-sum payout to purchase a portfolio of bonds
intended to provide them an income stream. Compare the advantages
and disadvantages of each strategy.
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FIN 420 Week 4 DQ 1

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Adjustable rate mortgages (ARMs) have received a great deal of bad
press due to the tremendous number of foreclosures resulting from