Sub-question 1A)

Eight years ago, Mr. Clermont acquired a forest for $ 1,200,000 with the objective of later exploiting it by selling wood to pulp and paper mills. Today, three possibilities are available to him:

A. Resell the entire property for $ 6,000,000

B. Begin next year selling lumber for an annual income of $ 800,000 for 15 years and resell the property at the end of the fifteenth year for $ 10,000,000.

C. Sell part of the property for 3,000,000 paid in cash and sell the rest to a pulp and paper company. This would guarantee from next year, annual payments of 1,500,000 to him and his descendants in perpetuity.

You are asked to calculate the effective rate of return achieved under each possibility. IMPORTANT: Introduce the algebraic equation.

Sub-question 1B)

A company has agreed to pay the following amounts as compensation for mining a granite deposit:

Year 1 to 5 Year 6 to 10 Year 11 to 15

$ 60,000

$ 75,000 $ 100,000

Assuming a minimum effective annual rate of return of 6% for the first 8 years and 8% effective thereafter, what is the cash equivalent (at time 0) of this series of payments?

Sub-question 1C)

One of your clients, now 62, estimates that an annual income of $ 120,000, in today's dollars, would be enough for him to have a nice retirement. He plans to take phased retirement from the age of 62 up to and including 64 years. During those 3 years, he will work part time and earn the equivalent of $ 60,000 in today's dollars. At 65, he will take full retirement. Your client's life expectancy is 85 years. If the investment rate of return is 7% and the expected inflation rate is 2% for the entire period.

How much should your client have accumulated in their RRSP today to reach their goal?Sub-question 1D)

You bought a building for $ 500,000 financed at 75% by a mortgage loan, exactly 4 years ago. You have signed for a 20-year amortization period and a 5-year term at 5.25% capitalized semi-annually. Today, the rate for a 1-year term is 2.25% capitalized semi-annually.

A) What is the monthly payment and the balance at the end of the term?

B) If you decide to change the contract from 5.25% to 2.25%, what will be the

new monthly payment and the new balance at the end of the term.

C) You decide not to modify the contract knowing that the penalty for modifying the contract is $ 9,000. Determine how much you won or lost by not changing the contract from 5.25% to 2.25%? (calculations

supporting and important to identify if gain or loss)

Sub-question 1E)

a) A bond bears a 10% coupon rate and matures in 14 years. The company could issue, today, similar bonds at par with a coupon rate of 8%. What is the value (price) of the bond (per $ 1,000)?

b) The rating of a bond with a coupon rate of 8% and having a maturity of 12 years is 88. What is the yield to maturity?

c) A preferred share pays an annual dividend of $ 1.00 payable semi-annually, the share trades at $ 9.75. What is the effective return demanded by preferred shareholders?

d) The management of a company has just made a preferred share issue giving a quarterly dividend of $ 0.60 starting exactly in one year, if the return demanded by the preferred shareholders is 15% effective, determine the price of the action.

e) The common shares of a company, numbering 22,500,000, are exchanged at a price of $ 15.25 per unit. The company has just paid a semi-annual dividend of $ 0.75 and the board of directors expects to increase this dividend by 1% persemester and this indefinitely. What is the value of common shareholders' equity and the effective rate of return required by them?

Sub-question 1F)

You signed 3 post dated checks. The amount is $ 2,000 by check. The first is redeemable in 2 years, the second in 3 years and 6 months and the last in 6 years. The borrowing rate is 8% effective. But after some thought, you would like to make other refunds instead of those 3 checks. Determine the option payouts below.

A) Monthly payments starting in exactly 1 year for 5 years.

B) Two installments in one year 4 years and the other, 2 times greater than the first in 6 years

and 3 months.

C) 5 payments every 3 years, starting in exactly one year.