1. Your grandfather is about to retire, and he wants to buy an annuity that will provide him with $80,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?

a. $955,507.24

b. $1,202,089.76

c. $1,027,427.14

d. $1,243,186.84

e. $1,058,249.96

2. Roth, Inc. issued convertible bonds at their $1,000 par value 5 years ago The bonds currently sell for $1,050. The bonds still have the same AA rating.    Since the bonds were issued:

A Market interest rates have increased

B The bonds are selling at a discount

C The bonds are selling at par

D The bonds are selling at a premium

E None of the above