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Time Value of Money Problems

1. Calculate the present value of the following investment: (a) Future Value: $123,000, (b) Number of Periods: 10, and (c) Interest Rate: 6%.

2. Calculate the future value of the following investment: (a) Present Value: $12,000, (b) Number of Periods: 13, and (c) Interest Rate: 4%.

3. Calculate the number of periods for the following investment: (a) Present Value: $30,000, (b) Future Value: $98,328, and (c) Interest Rate: 6%.

4. Calculate the Interest Rate for the following investment: (a) Present Value: $12,000, (b) Future Value: $25,000, and (c) Number of Periods: 14.

5. Calculate the difference between the future value of an investment compounded at a daily rate and the future value of an investment compounded at an annual rate, given the following data: (a) Present Value: $125,670, (b) Interest Rate: 6.5%, and (c) Years: 26.

6. Calculate the payment on an ordinary annuity, given the following information: (a) Present Value: $250,000, (b) Years: 20, and (c) Interest Rate: 3%.

7. Calculate the future value of an annuity due, given the following information: (a) Payment: $2,500, (b) Years: 30, and (c) Interest Rate: 14%.

8. Calculate the Monthly Payment on a mortgage with the following information: (a) Principal: $546,000, (b) Years: 30, and (c) Interest Rate: 4%.

Bond Valuation Problems

9. Calculate the price that you would be willing to pay for a bond that pays annual coupon payments and has the following characteristics: (a) Coupon Rate: 5%, (b) Years to Maturity: 20, and (c) The Market Rate of Interest: 6%.

10. Is the bond from problem 9 selling at: (a) a discount to par, (b) a premium to par, or (c) par value?

11. Calculate the price that you would be willing to pay for a bond that pays semi-annual coupon payments and has the following characteristics: (a) Coupon Rate: 9%, (b) Years to Maturity: 10, and (c) The Market Rate of Interest: 10%.

12. Is the bond from problem 11 selling at: (a) a discount to par, (b) a premium to par, or (c) par value?

13. Calculate the current yield on a bond that has the following characteristics: (a) Coupon Rate: 5%, (b) Price: $1,134, and (c) Market Rate of Interest: 4%.

Stock Valuation Problems

14. Calculate the price of a ‘no growth' stock using the following characteristics: (a) Dividend: $4.56 and (b) Required Rate: 13%.

15. Calculate the required rate of return on a stock with the following characteristics: (a) Price: $56.05 and (b) Dividend: $5.32.

16. Calculate the maximum price that you would pay for a ‘constant growth' stock that has the following characteristics: (a) Dividend: $3.50, (b) Growth Rate: 6%, and (c) Required Rate of Return: 14%.

17. Calculate the maximum price that you would pay for a ‘constant growth' stock that has the following characteristics: (a) Dividend: $1.50 (will pay), (b) Growth Rate: 5%, and (c) Required Rate of Return: 10%.

18. Calculate the required rate of return on the following ‘constant growth' stock: (a) Price: $45.23, (b) Dividend: $2.45, and (c) Constant Growth Rate: 4%.

19. Calculate the price that you would pay for a non-constant growth stock with the following characteristics: (a) Non-Constant Growth (3 Years): 24%, (b) Dividend: $2.30, (c) Constant Growth: 4%, and (d) Required Rate of Return: 12%.

20. Calculate the price that you would pay for a non-constant growth stock with the following characteristics: (a) Non-Constant Growth (3 Years): -10.00%, (b) Dividend: $3.21, (c) Constant Growth: 6%, and (d) Required Rate of Return: 15%.

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