Please solve in Excel Suppose you go Vito, a local loan shark, to inquire about the interest rate on loans You are told the interest will be a 6 percent discount loan If you borrow $2,000 for one month, the net interest will owe will be $2,000(1 06)4 $2,000 $524 95 Since this is a discount loan, you will receive $2,000 524 95 $1,474 05 today To help Vito on his bookkeeping, he will require you to make four weekly payments of $500 to repay the loan If you are brave enough to ask, what APR will Vito say you are paying What is the EAR you are paying Assume 52 weeks in a year You want to withdraw $7,000 per month in real terms for 25 years when you retire You plan to retire in 35 years, and expect to earn a 12 percent nominal effective annual return You will make monthly deposits to fund your retirement account Immediately after you make your last deposit, you plan to withdraw $20,000 in real terms to take an around the world trip You also wish to leave your grandchildren $2,000,000 in nominal terms at the end of the 25 years of withdrawals You will earn an 8 percent effective annual nominal return after you retire The inflation rate over the entire period is expected to be an effect annual rate of 3 8 percent What is the real amount of you monthly deposit How much will your account be worth in nominal terms immediately after your last deposit You have just won the Oddball lottery The payments are slightly unusual in that you will be paid $500,000 every two months with the first payment four months from today and a total of 80 payments You will also receive $750,000 every eight months with the first payment eight months from today and a total of 40 payments When the payments coincide, for example eight months from today, you will receive both payments If the interest rate is 0 7 percent per month, what is the value of your winnings today You are offered an investment that will pay an annual payment for 20 years The first payment one year from today will be $125,000 and will increase at the inflation rate The investment also includes an ending cash flow in 20 years, which means that in 20 years you will receive your last annual payment and the ending cash flow The value today of the ending cash flow is $750,000 and is expected to increase at 4 5 percent per year Over the next 20 years, you expect the inflation rate to be 3 5 percent per year If you require a nominal return of 7 percent on this investment, how much should you be willing to pay Dr Joe Schmo is a finance professor at a Southern liberal arts university A student who has performed poorly in the introductory finance class has offered to pay Dr Schmo for a better grade Dr Schmo presented the student with this agreement to sell a better grade Since he would be fired from his position, he would lose his salary and benefits His salary is $65,000 per year, paid in equal payments at the end of the each month His salary is expected to keep pace with inflation You may assume the monthly salary payments increase at the inflation rate His benefits amount to $25,000 per year, and the benefit payments occur at the beginning of each year The benefits will also increase at the rate of inflation He expects to work for another 25 years Assume the required return is 6 4 percent nominalrate and the inflation rate is 3 5 percent All rates are effective annual rates Dr Schmo will sell the student a better grade if the student pays the present value of the future lost salary and benefits How much will the student have to pay for a better grade Assume the firms below issue bonds with the following characteristics Both bonds are issued at par ABC bonds XYZ bonds Issue size $1 2 billion $150 million Maturity 10 years 1 20 years Coupon 9 10 Collateral First mortgage General debenture 2 Callable Not callable In 10 years Call price None 110 Sinking fund None Starting in 5 years 1 Bond is extendible at the discretion of the bondholder for an additional 10 years 2 A general debenture is secured by the creditworthiness of the firm and has no priority of payment in default Assuming the credit quality of the two bond issues are the same, identify four features of each of these issues that might account for a lower coupon rate for ABC Why would each of these features be important

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Please solve in Excel. Suppose you go Vito, a local loan shark, to inquire about the interest rate on loans. You are told the interest

Please solve in Excel.

Suppose you go Vito, a local loan shark, to inquire about the interest rate on loans. You are told the interest will be a 6 percent discount loan. If you borrow $2,000 for one month, the net interest will owe will be: $2,000(1 + .06)4 - $2,000 = $524.95. Since this is a discount loan, you will receive $2,000 - 524.95 = $1,474.05 today. To help Vito on his bookkeeping, he will require you to make four weekly payments of $500 to repay the loan. If you are brave enough to ask, what APR will Vito say you are paying? What is the EAR you are paying? Assume 52 weeks in a year.
You want to withdraw $7,000 per month in real terms for 25 years when you retire. You plan to retire in 35 years, and expect to earn a 12 percent nominal effective annual return. You will make monthly deposits to fund your retirement account. Immediately after you make your last deposit, you plan to withdraw $20,000 in real terms to take an around the world trip. You also wish to leave your grandchildren $2,000,000 in nominal terms at the end of the 25 years of withdrawals. You will earn an 8 percent effective annual nominal return after you retire. The inflation rate over the entire period is expected to be an effect annual rate of 3.8 percent. What is the real amount of you monthly deposit? How much will your account be worth in nominal terms immediately after your last deposit?
You have just won the Oddball lottery. The payments are slightly unusual in that you will be paid $500,000 every two months with the first payment four months from today and a total of 80 payments. You will also receive $750,000 every eight months with the first payment eight months from today and a total of 40 payments. When the payments coincide, for example eight months from today, you will receive both payments. If the interest rate is 0.7 percent per month, what is the value of your winnings today?
You are offered an investment that will pay an annual payment for 20 years. The first payment one year from today will be $125,000 and will increase at the inflation rate. The investment also includes an ending cash flow in 20 years, which means that in 20 years you will receive your last annual payment and the ending cash flow. The value today of the ending cash flow is $750,000 and is expected to increase at 4.5 percent per year. Over the next 20 years, you expect the inflation rate to be 3.5 percent per year. If you require a nominal return of 7 percent on this investment, how much should you be willing to pay?
Dr. Joe Schmo is a finance professor at a Southern liberal arts university. A student who has performed poorly in the introductory finance class has offered to pay Dr. Schmo for a better grade. Dr. Schmo presented the student with this agreement to sell a better grade: Since he would be fired from his position, he would lose his salary and benefits. His salary is $65,000 per year, paid in equal payments at the end of the each month. His salary is expected to keep pace with inflation. You may assume the monthly salary payments increase at the inflation rate. His benefits amount to $25,000 per year, and the benefit payments occur at the beginning of each year. The benefits will also increase at the rate of inflation. He expects to work for another 25 years. Assume the required return is 6.4 percent nominalrate and the inflation rate is 3.5 percent. All rates are effective annual rates. Dr. Schmo will sell the student a better grade if the student pays the present value of the future lost salary and benefits. How much will the student have to pay for a better grade?
Assume the firms below issue bonds with the following characteristics. Both bonds are issued at par.

ABC bonds XYZ bonds

Issue size $1.2 billion $150 million

Maturity 10 years¹ 20 years

Coupon 9% 10%

Collateral First mortgage General debenture²

Callable Not callable In 10 years

Call price None 110

Sinking fund None Starting in 5 years

¹Bond is extendible at the discretion of the bondholder for an additional 10 years.

²A general debenture is secured by the creditworthiness of the firm and has no priority of payment in default.

Assuming the credit quality of the two bond issues are the same, identify four features of each of these issues that might account for a lower coupon rate for ABC. Why would each of these features be important?