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Assignment

1.

A) What is the future value in 9 years of $6809 invested in an account with a stated annual interest rate of 7.3 %, compounded annually?

B) What is the future value in 9 years of $6809 invested in an account with a stated annual interest rate of 7.3 %, compounded semi-annually?

C) What is the future value in 9 years of $6809 invested in an account with a stated annual interest rate of 7.3 %, compounded monthly?

D) What is the future value in 9 years of $6809 invested in an account with a stated annual interest rate of 7.3 %, compounded continuously?

Future Value A

Future Value B

Future Value C

Future Value D

2. Investment X offers to pay you $2859 per year for 19 years, whereas Investment Y offers to pay you $7624 per year for 7 years. Calculate the present value for Investments X and Y if the discount rate is 7 %.

Present Value X

Present Value Y

3. First National Bank charges 11.3 % compounded monthly on its business loans. First United Bank charges 11.8 % compounded semiannually. Calculate the EAR for First National Bank and First United Bank.

EAR National

EAR United

4. One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $592 per month. You will charge 1.3 % per month interest on the overdue balance. If the current balance is $12883, how many years will it take for the account to be paid off?

Years

5.

A prestigious investment bank has designed a new security that pays a quarterly dividend of $3.23 in perpetuity.

The first dividend occurs one quarter from today. What is the price of the security if the stated annual interest rate is 6.9 %, compounded quarterly?

Price

6. Your firm has been working on an advanced technology. This technology will be available in the near term. The firm anticipates the first annual cash flow from the technology to be $138978 received three years from today.

Subsequent annual cash flows will grow at 2.6 % in perpetuity. What is the present value of the technology if the discount rate is 11.7 %?

Technology Value

7. You are planning to save for retirement over the next 36 years. To do this, you will invest $616 per month in a stock account and $190 per month in a bond account. The return of the stock account is expected to be 12 %, and the bond account will pay 3 %. When you retire, you will combine your money into an account with a return of 3 %.

How much will be in the stock account at retirement?
How much will be in the bond account at retirement?
How much can you withdraw each month from your account assuming a 25-year withdrawal period?

Stock Account Value

Bond Account Value

Retirement Withdrawal

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  • Category:- Basic Finance
  • Reference No.:- M92010517
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