1:A man deposited a sum of money into a retirement savings plan on February 01 1988. On February 01 2008 the accumulated sum in his account was $9773.15. How much did the person deposit? Assume the account pays 11.4% interest compounded daily and 1 year = 360 days.

 

Question 2:: A $1000 bond with 12% semiannual coupons, with n years of maturity, sells at $862.877 with a 15% yield to maturity (YTM). Find the price of a $1000 bond with a 10% semiannual coupon with a maturity of 2n years and a YTM of 15% (Assume semiannual compounding)
 

Question 3:: You are willing to pay $900 for a ten-year bond with a $1,000 par value and a coupon interest rate of 8% p.a. What is your expected rate of return? (Assume semi-annual coupon payment)
 

Question 4:: Flamingo Ltd needs $1000,000 for 180 days to meet its short-term obligation. The management decides to borrow this amount through a bank bill accepted by Bankwest. If the current yield is 5.6%, what is the bill's value? (Assume 1 year = 365 days)
 

Question 5:: Nelson plans to purchase a used car for $9550, which he will pay in 18 monthly instalments, the first instalment due on the day of purchase. If 18% compounded monthly is charged, compute the size of the monthly payment.
 

Question 6:: You have a $10 million capital budget and must make the decision about which investments your company should accept for the coming year. Use the following information on three mutually exclusive projects to determine which investment your company should accept. The company's cost of capital is 12%. 

	Project 1	Project 2
Initial cash outflow	-$4,000,000	-$5,000,000
Year 1 cash inflow	1,000,000	2,000,000
Year 2 cash inflow	2,000,000	3,000,000
Year 3 cash inflow	3,000,000	3,000,000

 

Question 7::Gail Dribble is analysing the shares of Petscan Radiology. Petscan's shares pays a dividend once each year, and it just distributed this year's $0.85 dividend. The market price of each of the shares is $12.14. Gail estimates that Petscan will increase its dividends by 7 % per year forever. After contemplating the risk of Petscan shares, Gail is willing to hold the shares only if they provide an annual expected return of at least 13 %. Should she buy Petscan shares or not?
 

Question 8:: Compute expected return from the following probability distribution of returns of Jones Corporation:

State	Probability	Return (%)
Boom	0.10	14
Recession	0.20	-5
Normal	0.40	10
Recovery	0.10	9