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1) Suppose that you inherited some money. Friend of yours is working as the unpaid intern at the local brokerage firm, and her boss is selling securities which call for four payments of= $50 (1 payment at end of each of next four years) plus the extra payment of= $1,000 at the ending of Year 4. Your friend says she can get you some of these securities at the cost of= $875 each. Your money is now invested in the bank which pays the 8% nominal (quoted) interest rate but with quarterly compounding. You regard securities as being just as safe, and as liquid, as your bank deposit, so your required effective annual rate of return on securities is same as that on your bank deposit. You should compute value of securities to make a decision whether they are good investment. Determine their present value to you?

Your company is planning to borrow $1,750,000 on a seven-year, 10%, annual payment, completely amortized term loan. What fraction of payment made at the ending of 2nd year will stand for repayment of principal?

Basic Finance, Finance

  • Category:- Basic Finance
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