Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Suppose a US Treasury bond will pay $2,500 five years from now. If the current interest rate on the 5-year Treasury bond is 4.25%,

1. Suppose a US Treasury bond will pay $2,500 five years from now. If the current interest rate on the 5-year Treasury bond is 4.25%, how much is the bond worth today?

2. Five years ago, Greenery Inc. earned $1.50 per share. His earnings this year were $3.20. What was the growth rate of earnings per share (EPS) over the 5-year period?

3. You plan to invest in securities that pay 8.0%, compounded annually. If you invest $5,000 today, how many years will it take for your investment to grow to $9,140.20?

4. You want to go to Europe in 5 years and can save $3,100 per year, starting one year from today. He plans to deposit the funds in a mutual fund that he believes will return 8.5% per year. Under these conditions, how much would you have just after making the fifth deposit, 5 years from now?

5. You inherited an oil well that will pay you $25,000 per year for 25 years, with the first payment due today . If you think the fair return on the well is 7.5%, how much should you ask for if you decide to sell it?

6. Suppose you have just won the state lottery and have the option of receiving $2,550,000 today or a 20-year $250,000 annuity, with the first payment one year from now. What rate of return is built into the annuity? Ignore taxes.

7. You sold a car and accepted a promissory note with the following cash flow as payment. What was the effective price you received for the car assuming an interest rate of 6.0%?

Years: 0 1 2 3 4

| | | | |

CF: $0 $1,000 $2,000 $2,000 $2,000

8. You are offered the opportunity to purchase an asset for $7,250 that is expected to produce cash flows of $750 at the end of year 1, $1,000 at the end of year 2, $850 at the end of year 3, and $6,250 at the end. of year 4. What rate of return would you earn if you bought this asset?

9. Master Card and other credit card issuers are required by law to print the Annual Percentage Rate (APR) on your monthly statements. If the APR is set at 18.00%, with interest paid monthly, what is the EFF% of the card?

10. Suppose you deposited $5,000 into a bank account that pays 5.25% compounded daily based on a 360-day year. How much will be in the account after 8 months, assuming each month has 30 days?

11. Suppose you are buying your first condo for $145,000 and you will make a down payment of $15,000. He has arranged to finance the remainder with a 30-year amortized monthly payment mortgage at a nominal interest rate of 6.5%, with the first payment due in one month. What will your monthly payments be?

12. You are considering investing in a bank account that pays a nominal annual rate of 7%, compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $150,000?


Step by Step Solution

3.58 Rating (151 Votes )

There are 3 Steps involved in it

Step: 1

1 To calculate the present value of the bond we can use the formula PV FV 1 rt where PV is the present value FV is the future value r is the interest rate and t is the time period Plugging in the give... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Corporate Finance

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

5th Edition

0135811600, 978-0135811603

More Books

Students also viewed these Finance questions

Question

Explain the principles of delegation

Answered: 1 week ago

Question

State the importance of motivation

Answered: 1 week ago

Question

Discuss the various steps involved in the process of planning

Answered: 1 week ago

Question

What are the challenges associated with tunneling in urban areas?

Answered: 1 week ago

Question

What are the main differences between rigid and flexible pavements?

Answered: 1 week ago