1.

Calculating Interest Rates (LO3) Solve for the unknown interest rate in each of the following:

Present Value

$240

360

39,000

38,261

Years

4

18

19

25

Interest Rate Future Value

$297

1,080

185,382

531,618

2) Calculating the Number of Periods (LO3) At 6.5% interest, how long does it take to double your money? To quadruple it?

3) Calculating Present Values (LO2) Normandin Inc. has an unfunded pension liability of $575 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 6.8%, what is the present value of this liability?

4) Calculating Rates of Return (LO3) On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented a promise to pay $100 at the maturity date on January 13, 2022, but the investor would receive nothing until then. The value of the coupon showed as $76.04 on the investor's screen. This means that the investor was giving up $76.04 on February 2, 2016, in exchange for $100 to be received just less than six years later. a. Based upon the $76.04 price, what rate was the yield on the Province of Ontario bond?

b. Suppose that on February 2, 2017, the security's price was $81.00. If an investor had purchased it for $76.04 a year earlier and sold it on this day, what annual rate of return would she have earned?

c. If an investor had purchased the security at market on February 2, 2017, and held it until it matured, what annual rate of return would she have earned?

5) Calculating Present Values (LO2) Suppose you are still committed to owning a $190,000 BMW (see Question 9). If you believe your mutual fund can achieve a 12% annual rate of return and you want to buy the car in nine years on the day you turn 30, how much must you invest today?

6) Calculating Future Values (LO1) You are scheduled to receive $15,000 in two years. When you receive it, you will invest it for six more years at 7.1% per year. How much will you have in eight years?