"Solve the following, show the steps for the final answer. 1. You have an opportunity to buy a $1,000 bond which matures in 10 years. The bond pays $30 every six months. The current market interest rate is 8%. What is the most you would be willing to pay for this bond? 2. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return. 3. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment? 4. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years? 5. Mr. Sullivan is borrowing $2 million to expand his business. The loan will be for ten years at 12% and will be repaid in equal quarterly installments. What will the quarterly payments be? 6. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement? 7. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay him each year? 8. The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns? 9. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? 10. Sponge Bob will receive a payment of $5,000 per year for 7 years beginning three years from today. At a discount rate of 9 percent, what is the present value of this deferred annuity? 11. Fullerton Company's bonds are currently selling for $1,157.75 per $1000 par-value bond. The bonds have a 10% coupon rate and will mature in 10 years. What is the approximate yield to maturity? 12. Madison Corporation has a $1000 par value bond outstanding paying annual interest of 7%. The bond matures in 20 years. If the present yield to maturity for this bond is 9%, calculate the current price of the bond using annual compounding. Use annual analysis. 13. Washington Corporation has a $1000 par value bond outstanding paying annual interest of 8%. The bond matures in 20 years. If the present yield to maturity for this bond is 10%, calculate the current price of the bond. Use annual analysis 14. The preferred stock of Gapers Inc. pays an annual dividend of $6.50. What is the price of the preferred stock if the required return is: a) 6% b) 8% c) 10% 15. The preferred stock of Lewis-Schultz Enterprises pays an annual dividend of $6.00. What is the required return if the market value of the preferred stock: a) $60 b) $70 c) $80 16. State Street Corp. will pay a dividend on common stock of $4.80 per share at the end of the year. The required return on common stock (Ke) is 13.2%. The firm has a constant growth rate of 7.2%. Compute the current price of the stock (Po). 17. Simon Fixtures Corp. is expected to pay $2.00 per share in dividends at the end of the next 12 months. The growth rate in dividends is expected to be constant at 8% per year. If the stock is selling for $50 per share, what is the required rate of return? " - Sent to Business Expert Tutor on 12/14/2010 at 8:39am You asked: " Solve the following, show how you reach the final answer. 1. You have an opportunity to buy a $1,000 bond which matures in 10 years. The bond pays $30 every six months. The current market interest rate is 8%. What is the most you would be willing to pay for this bond? 2. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return. 3. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment? 4. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years? 5. Mr. Sullivan is borrowing $2 million to expand his business. The loan will be for ten years at 12% and will be repaid in equal quarterly installments. What will the quarterly payments be? 6. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement? 7. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay him each year? 8. The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns? 9. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? 10. Sponge Bob will receive a payment of $5,000 per year for 7 years beginning three years from today. At a discount rate of 9 percent, what is the present value of this deferred annuity? 11. Fullerton Company's bonds are currently selling for $1,157.75 per $1000 par-value bond. The bonds have a 10% coupon rate and will mature in 10 years. What is the approximate yield to maturity? 12. Madison Corporation has a $1000 par value bond outstanding paying annual interest of 7%. The bond matures in 20 years. If the present yield to maturity for this bond is 9%, calculate the current price of the bond using annual compounding. Use annual analysis. 13. Washington Corporation has a $1000 par value bond outstanding paying annual interest of 8%. The bond matures in 20 years. If the present yield to maturity for this bond is 10%, calculate the current price of the bond. Use annual analysis 14. The preferred stock of Gapers Inc. pays an annual dividend of $6.50. What is the price of the preferred stock if the required return is: a) 6% b) 8% c) 10% 15. The preferred stock of Lewis-Schultz Enterprises pays an annual dividend of $6.00. What is the required return if the market value of the preferred stock: a) $60 b) $70 c) $80 16. State Street Corp. will pay a dividend on common stock of $4.80 per share at the end of the year. The required return on common stock (Ke) is 13.2%. The firm has a constant growth rate of 7.2%. Compute the current price of the stock (Po). 17. Simon Fixtures Corp. is expected to pay $2.00 per share in dividends at the end of the next 12 months. The growth rate in dividends is expected to be constant at 8% per year. If the stock is selling for $50 per share, what is the required rate of return? " - Sent to Business Expert Tutor on 12/14/2010 at 8:51am

Mgmt 210 Time Value of Money Fall 2011 Student: ___________________________________________________________________________ 1. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay her each year? 2. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement? ( hint, use Appx C then Appx D ) 3. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years? 4. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment? 5. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? Use n= 40 and i= 4% since its quarterly. If we used n=10 and i=16%, what would the accumulation be? 6. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return. 7. expert The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns? 8. Sponge Bob will receive a payment of $5,000 per year for 7 years . At a discount rate of 9 percent, what is the present value of this annuity? 9. BONUS The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return (market yield) on bonds is 10% (this is your discount rate) , what is the current price of: a) the bonds with 3 years to maturity? b) the bonds with 10 years to maturity? c) which bond issue has the greater risk? why? Question 1 PVoa = PMT [(1 (1 / (1 + i)n)) / i] Where PVoa is Present Value of Annuity i is rate if interest n is number of periods PMT is payment per period So 100,000 =PMT [(1 (1 / (1 +.10)^6)) / .10] PMT = $22960.74 Question 2 For her to take 60000 a year for 20 years she needs 1.2 million. She has no initial investments to begin with. We start at zero. Multiply 60,000 dollars by 20 years. That equals 1.2 million. You then multiply 21,519 X the 9 percent annually for twenty years and the you deplete the 60,000 for the next twenty years, still adding the 9% annually in order to come up with the correct amount. Mgmt 210 Time Value of Money Fall 2011 Student: ___________________________________________________________________________ 1. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay her each year? 2. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement? ( hint, use Appx C then Appx D ) 3. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years? 4. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment? 5. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? Use n= 40 and i= 4% since its quarterly. If we used n=10 and i=16%, what would the accumulation be? 6. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return. 7. expert The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns? 8. Sponge Bob will receive a payment of $5,000 per year for 7 years . At a discount rate of 9 percent, what is the present value of this annuity? 9. BONUS The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return (market yield) on bonds is 10% (this is your discount rate) , what is the current price of: a) the bonds with 3 years to maturity? b) the bonds with 10 years to maturity? c) which bond issue has the greater risk? why? Question 1 PVoa = PMT [(1 (1 / (1 + i)n)) / i] Where PVoa is Present Value of Annuity i is rate if interest n is number of periods PMT is payment per period So 100,000 =PMT [(1 (1 / (1 +.10)^6)) / .10] PMT = $22960.74 Question 2 For her to take 60000 a year for 20 years she needs 1.2 million. She has no initial investments to begin with. We start at zero. Multiply 60,000 dollars by 20 years. That equals 1.2 million. You then multiply 21,519 X the 9 percent annually for twenty years and the you deplete the 60,000 for the next twenty years, still adding the 9% annually in order to come up with the correct amount. Mgmt 210 Time Value of Money Fall 2011 Student: ___________________________________________________________________________ 1. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay her each year? 2. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement? ( hint, use Appx C then Appx D ) 3. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years? 4. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment? 5. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? Use n= 40 and i= 4% since its quarterly. If we used n=10 and i=16%, what would the accumulation be? 6. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return. 7. expert The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns? 8. Sponge Bob will receive a payment of $5,000 per year for 7 years . At a discount rate of 9 percent, what is the present value of this annuity? 9. BONUS The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return (market yield) on bonds is 10% (this is your discount rate) , what is the current price of: a) the bonds with 3 years to maturity? b) the bonds with 10 years to maturity? c) which bond issue has the greater risk? why? Question 1 PVoa = PMT [(1 (1 / (1 + i)n)) / i] Where PVoa is Present Value of Annuity i is rate if interest n is number of periods PMT is payment per period So 100,000 =PMT [(1 (1 / (1 +.10)^6)) / .10] PMT = $22960.74 Question 2 For her to take 60000 a year for 20 years she needs 1.2 million. She has no initial investments to begin with. We start at zero. Multiply 60,000 dollars by 20 years. That equals 1.2 million. You then multiply 21,519 X the 9 percent annually for twenty years and the you deplete the 60,000 for the next twenty years, still adding the 9% annually in order to come up with the correct amount