Question No. 01:

If your uncle borrows $25,000 from the bank at 10 percent interest over the eight-year life of the loan, what equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest (round to the nearest dollar)? How much of his first payment will be applied to interest?

To principle? How much of his second payment will be applied to each?

Question No. 02:

A) You have the opportunity to purchase an office building.You have a tenant lined up that will generate $16,000 per year in cash flows for three years.At the end of three years you anticipate selling the building for $450,000.

How much would you be willing to pay for the building? If the building is being offered for sale at a price of $350,000, Would you buy the building and what is the added value generated by your purchase and management of the building?

If you can purchase a building for $350,000. The investment will generate $16,000 in cash flows (i.e. rent) during the first three years.At the end of three years you will sell the building for $450,000.

What is the IRR on this investment?

B) When do we accept project on the basis of NPV ?

Question No. 03:

A) You are considering investing in ICI. Suppose ICI is currently undergoing expansion and is not expected to change its cash dividend while expanding for the next 4 years. This means that its current annual $3.00 dividend will remain for the next 4 years. After the expansion is completed, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. If the required return for ICI common stock is 11%, what is a share worth today?

B) Distinguish between zero growth, constant growth and super normal growth in dividend?

Question no. 04:

A) Write the effects on Bond Price on each of the following, 1. If YTM is greater than Coupon rate 2. If YTM is less than Coupon rate 3. If YTM is equal to Coupon rate

B) Explain why YTM affects on Bond Price ?

C) Briefly explain the classification of Financial Ratios.

D) What are the affects on savings on the basis of simple and compound interest? Give an example of both interests.

E) What is annuity and write the condition of annuity?