Can someone please help with these problems? Unsure of the calculations.

2016 Spring2 Financial Concepts Week3 Exercise6 Time Value of Money Student Name: Instructions Note: Unless otherwise stated, assume that interest is calculated on an annual basis. Leave all answers to TWO decimal places. For the boxes below, put calculator input numbers in the second row and your computed answer in the third row. Also, observe cash flow sign conventions: negative numbers for outflows [pay, invest, etc.]; positive numbers for inflows [receive, borrow, etc.] Some additional notes and guidance at the end of the document. 1) Ian invests $10,000 today in a 3 year CD paying 2.00% annually. He receives the full amount of principal and accrued interest in 3 years. How much will he receive in 3 years? monkey2 ing2 N ? i ? PV ? PMT ? FV =? 2) How much would Sylvia have to invest in a CD today to receive $15,000 in 5 years' time if the interest rate payable on the CD is 3.00% APR? N ? i ? PV PMT ? FV ? =? 3) A zero coupon bond is sold at a discount and pays no interest during its life. John, who is planning for retirement, invests $75,000 in this zero coupon bond which promises to pay $100,000 in 20 years' time. What is the rate of return on the investment? Assume annual TVM compounding. N BU MET AD-632OL i PV -1- PMT FV Wk4 Ex6 2016 Spring2 4) Mary has the opportunity to invest $10,000 in a 5 year CD. She has the option to receive a 3.65% return compounded annually; 3.62% compounded quarterly; or 3.60% compounded monthly. What option will give her the highest total return and how much will she receive in 5 years' time? [i.e. find the FVs of each of the options ...] Also calculate the Effective Annual Rate [EAR] of these of the investment options. PS: ... the one with the highest FV and EAR is the best investment option. Annual compounding: N i ? ? PV ? PMT ? FV EAR =? =? Quarterly compounding: N i PV PMT FV EAR Monthly compounding: N i PV PMT FV EAR 5) Upon retirement, Chris invests $200,000 in a 10-year ordinary annuity when the prevailing interest rate is 4.0% APR. How much will he receive annually? N i PV PMT FV 6) Using TVM on the financial calculator and the Rule of 72s, how long will it take a $10,000 investment to double if the interest rate is 6.0%? Assume annual TVM compounding. Using the calculator: N i PV PMT FV Using Rule of 72s: show calculation here ... What if the TVM compounding is on a monthly basis? Would your answer be the same? Explain by showing calculations below ... BU MET AD-632OL -2- Wk4 Ex6 2016 Spring2 7a) Helen purchases a condo and obtains a $400,000 fully amortizing level payment 30 year mortgage bearing an (annual) [quoted] fixed interest rate of 6.00% [interest compounded monthly]. How much will her monthly blended principal and interest payment be? [\"blended\" refers to calculating your PMT, which in an Amortized Loan, is made up of principal and interest components] N i PV PMT FV [i.e. your calculated PMT above should equal Interest + Amortization of Principal for each period [row] of payment below] 7b) For months 1, 2 and 3 of the mortgage, determine how much of the total payment is principal and how much is interest and construct an amortization table as follows: monkey2 column: [a] [b] [c] [d] = prev row's [e]= PMT from (7a)= [a] x APR 12 Mth 1 2 3 Beginning Principal 400,000.00 Payment from 7a) from 7a) from 7a) Interest 8) Johnson Corp is considering a Capital Expenditure $200,000. It will have a 5 year lifetime and will following years: Year 1 Year 2 Year 3 Year 4 Year 5 [e] = [b] - [c] = [a] - [d] Amortization of Principal Ending Principal project that will require an initial investment of return the following amounts at the end of the $20,000 $30,000 $40,000 $50,000 $60,000 a) If at the end of year 5, the project has no salvage value, what is the company's expected annual rate of return (IRR)? Show work below [i.e. fill in the CF numbers below; then use your calculator to get the IRR]: CF0 = ?, CF1 = ?, CF2 = ?, CF3 = ?, CF4 = ?, CF5 = ?, etc. IRR = ? b) If at the end of year 5 the project has a salvage value of $20,000, what is the company's expected annual rate of return? [Hint: The salvage value will add to the cash flow that Johnson receives in year 5; assume no tax on the salvage value] Show work below [i.e. fill in the CF numbers below; then use your calculator to get the IRR]: CF0 = ?, CF1 = ?, CF2 = ?, CF3 = ?, CF4 = ?, CF5 = ?, etc. IRR = ? c) If the required rate of return of project is 6%, calculate the Net Present Value (NPV) of (a). Show work below [i.e. fill in the CF numbers below; then use your calculator to get the NPV]: CF0 = ?, CF1 = ?, CF2 = ?, CF3 = ?, CF4 = ?, CF5 = ?, etc. I=? NPV = ? BU MET AD-632OL -3- Wk4 Ex6 2016 Spring2 Some notes on TVM and its use on a financial calculator 1) Make sure your P/Y is set to 1. This makes the calculator calculate in \"period mode\" since not all Time Value problems are on an annual basis. PS: if you are using a HP 12C, this is always set as such; no need to fiddle with it. PS: some other brands of calculators (e.g TI), fresh out of the box, has a factory setting of \"12\"; this is bad!!! Set it to 1. 2) Having done (1), the \"N\" or \"n\" is the number of periods (e.g. years, months, semiannual, etc.) depending on the question, and \"I/Y\" or \"i\" is the periodic rate ... PS: different calculators label their buttons differently as in above. 3) ... where number of periods and the periodic rate = number of years x compounding frequency = APR compounding frequency 4) For example, if a CD investment [Question #1] compounds interest on an annual rate, then N and I/Y will respectively be entered as \"number of years\" and \"annual interest rate\". 5) For example, if a 30-year mortgage [Question #7] has a quoted 6.00% APR with interest compounded monthly and payments being made on a monthly basis, then N = 30x12 or 360 periods (months) and I/Y = 6.00%/12 or 0.50% periodic rate (monthly rate). 6) For your calculator's \"I/Y\" or \"i\" button, you enter its number as a percent, NOT as a decimal. For example, if the periodic rate is 3%, then you enter \"3\