Q3. Your bank account compounds interest quarterly and has an annual percentage rate of 16 percent. What is the effective annual rate? [2 marks]

Q4. A financial institution offers an investment opportunity to you. If you invest $7,000 in a project today, you can receive $2,216 per year for four years. The first cash flow comes at the end of Year 2. What is the net present value of this project if the required rate of return is 12 percent? [3 marks]

Q5. During 2020, Schwert Corp. had $56,800 long-term debt retired, issued $79,000 new equity, paid 4,800 in interest and $8,670 in dividends. The firm acquired $45,500 in new fixed assets and sold $37,400 of old assets. Net working capital declined by $1,592 during the year. Schwert Corp. had gross sales of $105,806, cost of goods sold of $23,088, selling expenses of $10,900, depreciation of $3,890, and taxes of $7,100. [3 marks]

1. a) What is the Operating Cash Flow of Schwert Corp in 2020?

2. b) What is Cash Flow to Creditors of Schwert Corp in 2020?

3. c) What is the Cash Flow to Shareholders of Schwert Corp in 2020?

Q6. Amy invests $4,780 in a project today. She expects to receive cash flows $1,200, $2,150, $1,020, and $1,865 for years 1 to 4, respectively. If the required return is 8 percent. What is the discounted payback period? [3 marks]

Q7. Ally Financial Inc. issues a bond with 10 years until maturity at a current market price of $1,035.60. The face value is $1,000 and interest is paid semiannually. The yield to maturity on this bond is 7.52 percent. What is the coupon rate? [3 marks]

Q8. You are considering an investment that will pay you $4,000 per quarter forever. The first payment occurs one quarter from today. What is the present value of this investment if the annual percentage rate is 10 percent? [2 marks]

Q9. Your grandfather leaves you $87,000 as an inheritance. Rather than give you a lump-sum, your grandfather structures the inheritance as an annuity that pays $3,126 per month. You will receive the first payment one month later. If the effective annual rate is 12%, how many years does it take for you to receive all inheritance? [3 marks]

Q10. Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current annual salary is $50,000, and you expect your salary to increase at a rate of 2 percent annually as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be a constant percentage of this year's salary. Likewise, you expect to deposit a constant percentage of your salary each year until you reach age 65. Assume that the interest rate is 7 percent. [6 marks]