SHOW ALL CALCULATIONS!

1. Angela has a trust fund that will mature in three years with a value of $15,000. If this trust fund is earning a 5% rate of return annually, what is the value of this trust fund in today’s dollars (i.e., the trust fund’s present value)?

2. Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of the next three years. This annuity has an annual rate of return of 7%. Given this information, what is the present value today of this annuity?

3. Crown Enterprises recently issued a bond that has a $1,000 face or par value. This bond has a coupon interest rate of 8% and has a life of 10 years.

a. If interest is paid annually on this bond, calculate the market value today at t = 0 of this bond, assumed a required return for this bond of 6%.

b. Now, assume that the required return on this bond increases to 10%. Assume also that the bond pays interest semi-annually, rather than annually. Given this new information, calculate the market value of this bond today at t = 0.

4. Home and Hardware, Inc. recently issued a bond with a $20,000 par or face value. The bond has a five-year life and a coupon interest rate of 6%. Assume that the required return on the market for this bond is 8%. Given this information, calculate the market value of this bond today. The bond pays interest annually.

5. Family Foods, Inc. has a preferred stock issue outstanding that has a par value per share of $75.00. This preferred stock pays an annual divided that is 10% of its par value. Calculate the annual dividend paid per share on this preferred stock.