This document provides answers to questions for BUS 401 Week 2 Quiz Version b. It includes answers to 18 multiple choice questions covering topics like present value, compound interest, stock and bond valuation, and dividend discount models. An online link is provided to access a complete A+ tutorial with more information on these financial concepts.
• Independent advisors and distributor of financial products, real estate & loans
• Vast Industry experience with comprehensive knowledge of financial products, real estate & mortgage
• Working with Business Class, Professionals, Self Employed & employees of Corporates such as GE Capital, Evalueserve, Simon Carves, Metso Minerals, Canon, McKenzie, Genpact, Cairn India, Philips, Punj Lloyd, Cargill, Hughes, etc.
Budget: What is it? [Organization of Money] - PowerPoint:Yaryalitsa
PowerPoint Presentation looking at
WHAT IS A BUDGET
among other things:
It looks at some given meanings.
Rule of 72
Simple Interest
Savings Plan
There is a worksheet that accompanies the PowerPoint.
Learning Objectives
After studying this chapter, you should be able to:
[1] Indicate the benefits of budgeting.
[2] Distinguish between simple and compound interest.
[2] Identify the variables fundamental to solving present value problems.
[3] Solve for present value of a single amount.
[4] Solve for present value of an annuity.
[5] Compute the present value of notes and bonds.
The inflation bug as we learnt in our earlier learning ppt, "Are you Saving or Are you Investing", eats into our hard earned savings. So the value of our money reduces. Here in this learning session let’s learn more about “Time Value of Money”, which can help you manage your finances better.
An Investor Education & Awareness Initiative By Franklin Templeton Mutual Fund
The Retirement 101 Enrollment Presentation is the companion piece to the Retirement 101 Enrollment Guide, the marquee collateral in the Nationwide Retirement enrollment drive. Together they exceeded the 2011 standard entity first-year deposits goal of $84.8M by 25%, netting new participant deposits of $112.4M in its first year.
Financial Planning is a long term process through which you can achieve your financial goals. We at Financial Hospital bring to you a presentation to help you understand the basics of having a healthy and planned financial future.
BUS 401 Week 1 DQ 2 Cash Flow and Ratio Analysis.docx
BUS 401 Week 1 Quiz.docx
BUS 401 Week 2 DQ 1 Annuity and Capital Asset Pricing.docx
BUS 401 Week 2 DQ 2 Bonds and Common Stock.docx
BUS 401 Week 2 Quiz.docx
BUS 401 Week 3 DQ 1 NPV, PI, and IRR.docx
BUS 401 Week 3 DQ 2 Cost of Debt.docx
BUS 401 Week 3 Quiz.docx
BUS 401 Week 4 DQ 1 Leverage.docx
BUS 401 Week 4 DQ 2 Dividend Policies.docx
BUS 401 Week 4 Quiz.docx
DQ 2
Cash Flow and Ratio Analysis
From Chapters 3 and 4 complete Study Problems 3-2 (page 85) and 4-2 (page 122) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates’ postings.
Bonds and Common Stock
From Chapters 7 and 8 complete Study Problems 7-8 (pages 224-225) and 8-16 (page 253) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates’ postings.
7-8. (Bond valuation) ExxonMobil 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945, what is the bonds’ expected rate of return?
Annual interest: $90
Annual amortization of purchase discount: $55/20yrs. = $2.75
Total annual return: $92.75
Annual Yield: 92.75/945 = 9.788%
8-16. (Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years.
• Independent advisors and distributor of financial products, real estate & loans
• Vast Industry experience with comprehensive knowledge of financial products, real estate & mortgage
• Working with Business Class, Professionals, Self Employed & employees of Corporates such as GE Capital, Evalueserve, Simon Carves, Metso Minerals, Canon, McKenzie, Genpact, Cairn India, Philips, Punj Lloyd, Cargill, Hughes, etc.
Budget: What is it? [Organization of Money] - PowerPoint:Yaryalitsa
PowerPoint Presentation looking at
WHAT IS A BUDGET
among other things:
It looks at some given meanings.
Rule of 72
Simple Interest
Savings Plan
There is a worksheet that accompanies the PowerPoint.
Learning Objectives
After studying this chapter, you should be able to:
[1] Indicate the benefits of budgeting.
[2] Distinguish between simple and compound interest.
[2] Identify the variables fundamental to solving present value problems.
[3] Solve for present value of a single amount.
[4] Solve for present value of an annuity.
[5] Compute the present value of notes and bonds.
The inflation bug as we learnt in our earlier learning ppt, "Are you Saving or Are you Investing", eats into our hard earned savings. So the value of our money reduces. Here in this learning session let’s learn more about “Time Value of Money”, which can help you manage your finances better.
An Investor Education & Awareness Initiative By Franklin Templeton Mutual Fund
The Retirement 101 Enrollment Presentation is the companion piece to the Retirement 101 Enrollment Guide, the marquee collateral in the Nationwide Retirement enrollment drive. Together they exceeded the 2011 standard entity first-year deposits goal of $84.8M by 25%, netting new participant deposits of $112.4M in its first year.
Financial Planning is a long term process through which you can achieve your financial goals. We at Financial Hospital bring to you a presentation to help you understand the basics of having a healthy and planned financial future.
BUS 401 Week 1 DQ 2 Cash Flow and Ratio Analysis.docx
BUS 401 Week 1 Quiz.docx
BUS 401 Week 2 DQ 1 Annuity and Capital Asset Pricing.docx
BUS 401 Week 2 DQ 2 Bonds and Common Stock.docx
BUS 401 Week 2 Quiz.docx
BUS 401 Week 3 DQ 1 NPV, PI, and IRR.docx
BUS 401 Week 3 DQ 2 Cost of Debt.docx
BUS 401 Week 3 Quiz.docx
BUS 401 Week 4 DQ 1 Leverage.docx
BUS 401 Week 4 DQ 2 Dividend Policies.docx
BUS 401 Week 4 Quiz.docx
DQ 2
Cash Flow and Ratio Analysis
From Chapters 3 and 4 complete Study Problems 3-2 (page 85) and 4-2 (page 122) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates’ postings.
Bonds and Common Stock
From Chapters 7 and 8 complete Study Problems 7-8 (pages 224-225) and 8-16 (page 253) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates’ postings.
7-8. (Bond valuation) ExxonMobil 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945, what is the bonds’ expected rate of return?
Annual interest: $90
Annual amortization of purchase discount: $55/20yrs. = $2.75
Total annual return: $92.75
Annual Yield: 92.75/945 = 9.788%
8-16. (Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years.
!#$&$()#+,(!1. Question Which of the following isar.docxkatherncarlyle
!"#$%&$'()*#+,(
!
1. Question : Which of the following is/are true?
I. Asset management ratio indicates how effectively a firm
generates profits on sales, assets and stockholder’s equity.
II. Liquidity ratios indicate the firm’s capacity to meet its
short-term financial obligations, but not its long-term
financial obligations.
III. Profitability ratios indicate how efficiently a firm is using
its assets to generate sales.
IV. Financial leverage ratios indicate the firm’s capacity to
meet its financial obligations, both short-term and long-term.
Student Answer:
II and IV
I and II
I, II, and IV
I and III
Question 2. Question : Which of the following is/are true?
I. When a loan is amortized over a five year term, the amount
of interest paid is decreased each year.
II. The effective annual rate of interest will always be equal
to or less than the nominal annual rate of interest.
III. An annuity due is the annuity in which the payments or
receipts occur at the beginning of each period.
IV. If the present value of a given sum is equal to its future
value, then the discount rate must be zero.
Student Answer:
IV only
III & IV
II, III & IV
I, III & IV
Question 3. Question : If a firm’s current ratio is 3.0,
Student Answer:
it is possible for its quick ratio to be larger than 3.0.
its current liabilities exceed its current assets.
it is possible for its quick ratio to be smaller than 3.0.
its current liabilities equal its current assets.
Ch 3
Ch 5
Ch 3
Question 4. Question : Which of the following is/are true?
I. The shareholder wealth maximization goal states that
management should seek to maximize the present value of
the expected future returns to the owners of the firm.
II. The primary reason for the agency problem between the
stockholders and managers is because of the separation of
ownership and management.
III. Protective covenants in a company's bond indentures are
used in agency relationships involving stockholders and
creditors.
IV. The fact that no investor can expect to earn excess
returns based on an investment strategy using only historical
stock price or return information is an example of
semistrong-form market efficiency.
Student Answer:
I and IV
I, II and IV
I, II and III
All of the above
Question 5. Question : If you’re a financial manager of a MNC (U.S. based) and you
anticipate that your company will need to pay C$2 million 6
months later. If you would like to make use of either forward
or futures or options contracts to fix your exchange rate
today, what is your strategy?
Student Answer:
BUY forward/futures contracts for C$2 million or BUY
call options for C$2 million.
SELL forward/futures contracts for C$2 million or BUY
call options for C$2 million.
BUY forward/futures contracts for C$2 million or ...
Emerging Ethical Issues
XXXXXX
September 8, 2014
xxxxx
By: Team A
Eugene Adamos, Delano Chambers, Chantle Ferguson, Kelli Lee, April Porter
Introduction
Team A
2
References
Team A
3
What issues involve problems with consent?
Team A
4
Questions assigned in this assignment are similar to problems assigned above. However, the numbers in these questions are different from your textbook.
You must show the work to get full credit in each question.
Assigned problems:
Problem 5-9
Bond Valuation and Interest Rate Risk
The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
a.
1. What will be the value of each of these bonds when the going rate of interest is 4%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L
$
Bond S
$
2. What will be the value of each of these bonds when the going rate of interest is 7%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L
$
Bond S
$
3. What will be the value of each of these bonds when the going rate of interest is 11%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L
$
Bond S
$
Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
I. Longer-term bonds have more interest rate risk than shorter-term bonds.
II. Shorter-term bonds have more interest rate risk than longer-term bonds.
III. Longer-term bonds have more reinvestment rate risk than shorter-term bonds.
Problem 5-12
Bond Yields and Rates of Return
A 25-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $950. (Assume that the bond has just been issued.)
a. What is the bond's yield to maturity? Round your answer to two decimal places.
b. What is the bond's current yield? Round your answer to two decimal places.
c. What is the bond's capital gain or loss yield? Loss should be indicated with minus sign. Round your answer to two decimal places.
d. What is the bond's yield to call? Round your answer to two decimal places.
Problem 5-23
Determinants of Interest Rates
Suppose you and most other investors expect the inflation rate to be 6% next year, to fall to 4% during the following year, and then to remain at a rate of 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term securities (those that mature in a few days) to a level of 0.2 percentage points for 1-year securities. Furthermore, maturity risk premiums ...
Webster’s dictionary defines synthesisas The combining of separa.docxmelbruce90096
Webster’s dictionary defines synthesisas: “The combining of separate elements or substances to form a coherent whole”. Throughout the journals in this course you will have the opportunity to synthesize each chapter, or, as Webster would say, combine elements of the chapter you think were especially poignant to form a short paragraph that captures it as a whole. Your synthesis of Chapter Two should be between 200-300 words, be written in only your words (i.e., no quotes, paraphrase, etc.), and capture the essence (essential points) of the chapter concepts.
After reading Chapter 2, I am more aware of how important it is to make sure that all children
have the opportunity to learn in all the different categories of styles. All children are different
and come from different backgrounds and lifestyles therefore it is up to the teacher to really get
to know who he/she is teaching so that lesson plans can be completed to fit every student. Even
though students learn at different levels they can all finish a school year in the same place if the
teacher stays on top of things. Part of planning lessons is to know what interests your students
and then plan from there. The curriculum is set at the beginning of the year for the grade levels
but the teacher can change things around to make it more interesting for the students and keep
them focused. In am big on students working in groups reason being is that they can excel in
groups. The children that are ready to move ahead in certain areas can do so and the children that
need a little additional help can also get that.
LESSON 1
1. Which of the following would result in a decrease in cash flow and a use of cash?
A. A decrease in notes payable
B. An increase in long-term debt
C.A decrease in inventory
D. A decrease in common stock
2. In the United States, for the 2007 tax year, federal corporate income tax rates never exceeded an average rate of
A. 15%. C. 39%.
B. 35%. D. 34%.
3. A firm has assets of $60,000 and owners’ equity of $33,000. Which of the following is the correct balance of the firm’s liabilities?
A. $33,000 C. $93,000
B. $27,000 D. $60,000
4. Which of the following would result in an increase in cash flow and a source of cash?
A. A decrease in notes payable
B. A decrease in long-term debt
C. An increase in inventory
D. An increase in common stock
5. A firm has current assets of $10,000 and current liabilities of $7,000. Which of the following is the correct net working capital for the firm?
A. $10,000 C. $3,000
B. $7,000 D. $13,000
6. If a firm has an accounts receivable balance of $18,800 at the end of 2007 and $16,500 at the end of 2008, which of the following statements about accounts receivable is correct?
A. Accounts receivable decreased by $2,300 and represented a use of cash.
B. Accounts receivable increased by $2,300 and represented a source of cash.
C. Accounts receivable decreased by $2,300 and represented a source of cash.
D. Accounts receivable increased by $2,300 an.
This is the third presentation for the University of New England Graduate School of Business unit GSB711 - Managerial Finance. It explores the time value of money, using examples to help students clarify this concept.
Assignment 1 for Unit 2.You have to SHOW your work (show how you.docxtrippettjettie
Assignment 1 for Unit 2.
You have to SHOW your work (show how you get the answers) to get credit. The answers to these problems are given to you on a separate file.
Below are the formulas for each type of loan and bonds. Use the respective formula regarding a respective question: for example, on questions regarding a simple loan use the simple loan formula, on questions regarding a fixed payment loan question use the fixed payment loan formula, and so on.
You also have to know the formulas for the test.
Future Value :
F
C
rate
coupon
=
FV= future value, PV= present value, i= interest rate, N= number of years.
.
Present Value:
(1)
N
FV
PV
i
=
+
FV= future value, PV= present value, i= interest rate, N= number of years.
Simple loan:
(1)
N
FVPVi
=+
FV = future value, i = interest rate, n = number of years
Fixed payment loan:
n
i
FV
loan
)
1
(
+
=
FP = fixed payment, i = interest rate, n = number of years
n
i
FP
i
FP
i
FP
loan
)
1
(
...
)
1
(
)
1
(
2
1
+
+
+
+
+
+
=Coupon bond:
P = price of bond, i = interest rate, n = number of years, c = coupon payment, and F = face value of the bond.
n
i
F
C
i
C
i
C
P
)
1
(
...
)
1
(
)
1
(
2
1
+
+
+
+
+
+
+
=
P = price of bond, C = coupon payment
P
C
yield
current
=
F = face value, C = coupon payment
Discount Bond:
F
C
rate
coupon
=
P = price of bond, i = interest rate, n = number of years, F = face value
Yield to maturity on a discount bond with less than a year of maturity:
n
i
F
P
)
1
(
+
=
P = price of bond, F = Face value, G = number of days to maturity.
Yield on discount basis on a bond with less than a year of maturity:
G
P
P
F
ytm
365
*
-
=
P = price of bond, F = face value
G
F
P
F
basis
discount
on
yield
360
*
-
=Consol bond:
P = price of bond, i = interest rate
Bring the answers to the following questions to Class
simple loan:
1. End of ten years you will pay back $20,000. If I = 6% , how much is the loan amount now.
2. If you borrowed $9900 at i = 10% to pay back at
the end of 15 years, how much money do you pay
back?
3. You will receive $35,000 at the end of two
years. Its present value is $20,000. The yield to maturity equals what?
fixed payment loan:
1. i = 9%, loan = $15,000, 5 year loan. The fixed payment =___.
2. The fixed payment = $7000,
i. i= 9%, 3 years, loan =___
coupon bond:
1. coupon payment = $100, face value = $6000,
i = 5%, 4 years, a) price of bond =___ b) coupon rate =___ c) current yield =____
2. Coupon rate = 5%, face value = $12,000, i = 7% a) price of bond for a) 1 year bond=___, b) 2
year bond =____ c) 3 year bond =_____
3. if i increases to 12% , what happens to each
of the prices (in a) above.
discount bond (zero coupon bond):
1. Face value = $20,000, price = $19,000, 1 year bond, ytm = _
2. Face value = $20,000, price 19,000, 1 year bond , number of days to maturity = 90 days. a) ytm =_______ b) yield on discount basis =___
3. Fac ...
The risk-free rate, kRF, is 3.6 percent and the market risk premiu.docxssusera34210
The risk-free rate, kRF, is 3.6 percent and the market risk premium, (kM - kRF), is 5 percent. Assume that required returns are based on the CAPM. Your $1 million portfolio consists of $ 206 ,000 invested in a stock that has a beta of 1.3 and the remainder invested in a stock that has a beta of 0.5 . What is the required return on this portfolio? Enter your answer to the nearest .1%. Do not use the % sign in your answer, thus 12.1% is 12. 1 rather than 12.1 or .121.
Your Answer:
Question 2 options:
Answer
Question 3 (3.9 points)
Jenni Company has a total debt to total assets ratio of 45% and a current ratio of 4.1. The firm's stock sells for $ 119.4 per share. The total market value of the equity is $ 5.7 million. The market-to-book ratio is 5.7 . What is the book value per share? Show your answer to the nearest $.01. Do not use the $ symbol in your answer, thus if your answer is $2.80 enter 2.80.
Your Answer:
Question 3 options:
Answer
Question 4 (3.9 points)
Thompson Inc.'s latest EPS was $3.50, its book value per share was $22.75, it had 215,000 shares outstanding, and its debt-to-assets ratio was 46%. How much debt was outstanding?
Question 4 options:
$3,393,738
$3,572,356
$3,958,289
$4,166,620
Question 5 (3.9 points)
You have just taken out a 10-year, $12,075 loan to purchase a new car. This loan is to be repaid in 120 equal end-of-month installments. If each of the monthly installments is $150, what is the effective annual interest rate on this car loan?
Question 5 options:
6.5431%
7.8942%
8.544%
8.8871%
9.0438%
Question 6 (3.9 points)
A fixed coupon bond with par value of $1,000 has a coupon of 8%, semiannually payable. The current annual nominal market interest rate (i.e., yield to maturity) for this bond is 6%. Therefore the bond is selling ……….. and the bond's current yield is ………..
Question 6 options:
at a premium; greater than 8%
at par value; at 8%
at a premium; less than 8%
at a discount; greater than 8%
at a discount; less than 8%
Question 7 (3.9 points)
2 years ago an investor purchased a 4% semi-annual compounding coupon bond with a remaining maturity of 20 years at a price of (at that time) 90% of par. Today, i.e. two years after the purchase, the investor realizes that the bond has exactly the same price like it had two years ago (i.e. 90%). Based on this information, which of the following answers is correct:
Question 7 options:
The YTM of the 4% Bond today is the same like two years ago.
Overall, the profit for the investor from this investment over the two years is Zero.
Over the remaining life of the bond, the value of the principal exceeds the value of the coupons.
If the investor held the 4% coupon bond until maturity, the overall return from this investment over the 18 years would be 100% minus 90%, i.e. 10%.
None of the above answers is correct.
Question 8 (3.9 points)
Consider the following information and then calculate the required rate of return for the Universal Investment Fund, whi ...
1.You have $24,435.78 in a brokerage account, and you plan to depo.docxpaynetawnya
1.You have $24,435.78 in a brokerage account, and you plan to deposit an additional $6,000 at the end of every future year until your account totals $240,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? Round your answer to two decimal places at the end of the calculations.
years
2.Time for a lump sum to double
If you deposit money today in an account that pays 5.5% annual interest, how long will it take to double your money? Round your answer to two decimal places.
years
3.Present and future values of a cash flow stream
An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4, $300 at the end of Year 5, and $600 at the end of Year 6.
a. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent.
$
b. If other investments of equal risk earn 4% annually, what is its future value? Round your answer to the nearest cent.
$
Problem 5-14
Future value of an annuity
Find the future values of these ordinary annuities. Compounding occurs once a year. Round your answers to the nearest cent.
a. $1,000 per year for 10 years at 6%.
$
b. $500 per year for 5 years at 3%.
$
c. $1,000 per year for 16 years at 0%.
$
Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.
d. $1,000 per year for 10 years at 6%.
$
e. $500 per year for 5 years at 3%.
$
f. $1,000 per year for 16 years at 0%.
$
Problem 5-9
Present and future values for different periods
Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. Round your answers to the nearest cent.
a. An initial $500 compounded for 1 year at 8%.
$
b. An initial $500 compounded for 2 years at 8%.
$
c. The present value of $500 due in 1 year at a discount rate of 8%.
$
d. The present value of $500 due in 2 years at a discount rate of 8%.
$
Problem 6-1
Yield Curves
TERM
RATE
6 months
5.03%
1 year
5.41%
2 years
5.65%
3 years
5.79%
4 years
5.87%
5 years
6.1%
10 years
6.35%
20 years
6.63%
30 years
6.76%
a. Plot a yield curve based on these data.
The correct sketch is A, B, C, D
.
b. What type of yield curve is shown?
1. The yield curve is abnormal
2.upward sloping
3. curve is flat
4. downward sloping
5. inverted
c. What information does this graph tell you?
1. In general the rate of inflation is expected to increase and the maturity risk premium is less than zero
2. In general the rate of inflation is expected to decrease and the maturity risk premium is less than zero
3. In genera the rate of inflation is expected to increase and the maturity risk premium is greater than zero
4. The shape of the yield curve depends only on expectations about future inflation which is expected to increase
5. In general the rate of inflation is expected to decrease and the maturity risk premium is greater than zero
d. Based on this y ...
Question 1. You can earn $40 in interest on a $1,000 deposit for.docxmakdul
Question 1.
You can earn $40 in interest on a $1,000 deposit for 8 months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a
$1,000 deposit for:
a. 2 months.
b. 1 year.
c. 1.5 years.
a. 2-months.
For a 2-month, $1,000 deposit you will earn
$. (Round to the nearest cent).
b. 1-year.
For a 1-year, $1,000 deposit you will earn
$. (Round to the nearest cent).
c. 1.5-years.
For a 1.5-year, $1,000 deposit you will earn
$. (Round to the nearest cent).
Question 2.
You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $3,053 and you have made every payment on time. The original term of the mortgage was 30 years, and the mortgage is exactly four years and eight months old. You have just made your monthly payment. The mortgage interest rate is 5.798% (APR). How much do you owe on the mortgage today?
The amount you owe today is
$. (Round to the nearest dollar.)
Question 3.
Consider a project that requires an initial investment of $100,000 and will produce a single cash flow of
$150,000 in 5 years.
a. What is the NPV of this project if the 5-year interest rate is 5.0% (EAR)?
b. What is the NPV of this project if the 5-year interest rate is 10.0% (EAR)?
c. What is the highest 5-year interest rate such that this project is still profitable?
a. What is the NPV of this project if the 5-year interest rate is 5.0% (EAR)?
The NPV in this case (EAR equals 5.0 %) is $. (Round to the nearest dollar.)
b. What is the NPV of this project if the 5-year interest rate is 10.0% (EAR)?
The NPV in this case (EAR equals 10.0 %) is $. (Round to the nearest dollar.)
c. What is the highest 5-year interest rate such that this project is still profitable?
The highest EAR such that this project is still profitable is % (Round to two decimal places.)
Question 4.
In the summer of 2008, at Heathrow airport in London, Bestofthebest (BB), a private company, offered a lottery to win a Ferrari or 87,000 British pounds, equivalent at the time to about $174,000. Both the Ferrari and themoney, in 100 pound notes, were on display. If the U.K. interest rate was 4% per year, and the dollar interest rate was 2% per year (EARs), how much did it cost the company in dollars each month to keep the cash on display? That is, what was the opportunity cost of keeping it on display rather than in a bank account? (Ignore taxes.)Hint: Make sure to round all intermediate calculations to at least five decimal places.
The opportunity cost of keeping it on display rather than in a bank account is £ per month. (Round to two decimal places).
Question 5.
A 30-year bond with a face value of $1,000 has a coupon rate of 5.50%, with semiannual payments.
a. What is the coupon payment for this bond?
b. Enter the cash flows for the bond on a timeline
a. What is the coupon payment for this bond?
The coupon pay ...
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In this paperwork of BUS 401 Week 2 Quiz Version b you will
find the answers on the next questions:
1. Beta is a statistical measure of (Points : 1)
2. At what rate must $500 be compounded annually for it to
grow to $1,079.46 in 10 years? (Points : 1)
3. How much money must you pay into an account at the end
of each of 20 years in order to have $100,000 at the end of
the 20th year? Assume that the account pays 6% per year,
and round to the nearest $1. (Points :1)
4. Halverson, Inc. just issued $1,000 par 20-year bonds. The
bonds sold for $936 and pay interest semi-annually. Investors
require a rate of 7.00% on the bonds. What is the amount of
the semi-annual interest payment on the bonds? (Points : 1)
5. What is the present value of $15,500 to be received 12
years from today? Assume a discount rate of 7.5%
compounded annually and round to the nearest $1. (Points :
1)
6. Finance theory suggests that the current market value of a
bond is based upon which of the following? (Points : 1)
7. A typical measure for the risk-free rate of return is the
(Points : 1)
8. A financial advisor tells you that you can make your child a
millionaire if you just start saving early. You decide to put an
equal amount each year into an investment account that
earns 7.5% interest per year, starting on the day your child is
born. How much would you need to invest each year
2. (rounded to the nearest dollar) to accumulate a million for
your child by the time he is 35 years old? (Your last deposit
will be made on his 34th birthday.) (Points : 1)
9. You decide you want your child to be a millionaire. You
have a son today and you deposit $15,000 in an investment
account that earns 9% per year. The money in the account
will be distributed to your son whenever the total reaches
$1,000,000. How old will your son be when he gets the
money (rounded to the nearest year)? (Points : 1)
10. How much money must you pay into an account at the
end of each of 20 years in order to have $100,000 at the end
of the 20th year? Assume that the account pays 6% per year,
and round to the nearest $1. (Points : 1)
11. Preferred stock is similar to a bond in the following way
(Points : 1)
12. A financial advisor tells you that you can make your child
a millionaire if you just start saving early. You decide to put
an equal amount each year into an investment account that
earns 7.5% interest per year, starting on the day your child is
born. How much would you need to invest each year
(rounded to the nearest dollar) to accumulate a million for
your child by the time he is 35 years old? (Your last deposit
will be made on his 34th birthday.) (Points : 1)
13. The present value of $1,000 to be received in 5 years is
________ if the discount rate is 7.8%. (Points : 1)
14. A typical measure for the risk-free rate of return is the
(Points : 1)
15. The capital asset pricing model (Points : 1)
16. Assume that Brady Corp. has an issue of 18-year $1,000
par value bonds that pay 7% interest, annually. Further
assume that today's required rate of return on these bonds is
3. 5%. How much would these bonds sell for today? Round off
to the nearest $1.
17. What is the value of a bond that matures in 5 years, has
an annual coupon payment of $110, and a par value of
$2,000? Assume a required rate of return of 7%. (Points : 1)
18. A corporate bond has a coupon rate of 12%, a yield to
maturity of 10.55%, a face value of $1,000, and a market
price of $850. Therefore, the annual interest payment is
(Points : 1)
Business - General Business
.
Question :
The longer we have to wait for a future amount to be
received:
Student Answer:
the lower its present value will be.
the higher its present value will be.
Time does not affect present value, so it doesn’t matter how
long we have to wait.
Beyond 10 years the value doesn’t change anymore because
10 years might as well be 20 years.
Instructor Explanation:
The answer can be found in Section 4.3: The Time Value of a
Single Cash Flow.
4. Points Received:
1 of 1
Comments:
2.
Question :
Compounding means that:
Student Answer:
dollar interest the first year is multiplied by the number of
years to get total interest.
the same dollar amount of interest is paid each period.
interest is paid on interest earned in earlier periods.
the rate of interest grows over time.
Instructor Explanation:
The answer can be found in Section 4.2: Compound and
Simple Interest.
Points Received:
1 of 1
Comments:
3.
Question :
An ordinary annuity has its first payment ______, but an
5. annuity due has its first payment _________.
Student Answer:
at the beginning of the period; at the beginning of the period.
at the beginning of the period; at the end of the period.
at the end of the period; at the end of the period.
at the end of the period; at the beginning of the period.
Instructor Explanation:
The answer can be found in Section 4.4: Valuing Multiple
Cash Flows.
Points Received:
1 of 1
Comments:
4.
Question :
The great majority of stock trades occur:
Student Answer:
in the secondary markets.
in the primary market.
as IPOs (initial public offerings).
6. directly between the company and investors.
Instructor Explanation:
The answer can be found in Section 5.1: Stocks.
Points Received:
1 of 1
Comments:
5.
Question :
Shareholders gains come in the form of:
Student Answer:
only dividends.
only capital gains.
dividends and capital gains.
interest payments.
Instructor Explanation:
The answer can be found in the introduction to Chapter 5.
Points Received:
1 of 1
Comments:
7. 6.
Question :
Interest rates are given as annual rates. If semiannual (twice
a year) compounding is being used, then you would make the
following adjustments:
Student Answer:
Double the rate and double the number of years.
Double the rate and halve the number of years.
Halve the rate and halve the number of years.
Halve the rate and double the number of years.
Instructor Explanation:
The answer can be found in Section 4.3: The Time Value of a
Single Cash Flow.
Points Received:
1 of 1
Comments:
7.
Question :
Which of the following is true of the structure of a zero-coupon
bond?
Student Answer:
an annuity of interest payments and a single principal
8. payment at maturity
no interim interest payments but a variable payment at
maturity, depending on interest rates
an annuity of payments comprised of both interest and
principal
no interim interest payments and a single payment at
maturity
Instructor Explanation:
The answer can be found in Section 5.2: Bonds.
Points Received:
1 of 1
Comments:
8.
Question :
If we make the assumption that a company’s dividends grow
at some constant rate, then we can value the stock as:
Student Answer:
a growing perpetuity.
a growing a...
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