Pestona Part III: Formula problems @ 10 points each Do 2 of the following problems using formulas. Set up each problem using an appropriate formula. Solve the problem showing each step of your work. Do NOT solve using financial calculator functions. Round all s problems to the nearest dollar. All rate problems must be carried at least 4 decimal places and left in % form. Work must be shown and all answers must be legible to receive credit. Partial credit is awarded. 1. Determine the market price of a 15-year, 5.75%, $250,000 coupon bond when the market interest rate is 6.15%. 2. Suppose in addition to the $20 million donation for a new CoBPA, the Nistler's also decide to fund a Nistler Endowed Chair position for each of the eight departments in the COBPA. Each position will earn $185,000 annually (assume end of year lump sum payouts). CoBPA believes it can earn a return of 6.25% annually on the endowment Using the formula approach, determine both of the following a) How much would the Nistler's need to donate to fund these two positions in perpetuity if COBPA fills these positions immediately? b) How much would the Nistler's need to donate to fund these two positions in perpetuity if COBPA fills these positions five years from now? 3. You invest $15,000 today at a 6.6% annual rate that is compounded semiannually. After 12 years the interest rate increases to an 8% rate compounded quarterly. What is the investment worth in 24 years? (Use formula approach) Pestona Part III: Formula problems @ 10 points each Do 2 of the following problems using formulas. Set up each problem using an appropriate formula. Solve the problem showing each step of your work. Do NOT solve using financial calculator functions. Round all s problems to the nearest dollar. All rate problems must be carried at least 4 decimal places and left in % form. Work must be shown and all answers must be legible to receive credit. Partial credit is awarded. 1. Determine the market price of a 15-year, 5.75%, $250,000 coupon bond when the market interest rate is 6.15%. 2. Suppose in addition to the $20 million donation for a new CoBPA, the Nistler's also decide to fund a Nistler Endowed Chair position for each of the eight departments in the COBPA. Each position will earn $185,000 annually (assume end of year lump sum payouts). CoBPA believes it can earn a return of 6.25% annually on the endowment Using the formula approach, determine both of the following a) How much would the Nistler's need to donate to fund these two positions in perpetuity if COBPA fills these positions immediately? b) How much would the Nistler's need to donate to fund these two positions in perpetuity if COBPA fills these positions five years from now? 3. You invest $15,000 today at a 6.6% annual rate that is compounded semiannually. After 12 years the interest rate increases to an 8% rate compounded quarterly. What is the investment worth in 24 years? (Use formula approach)
