Brandon Powell
FIN 534 Chapter 4
Question 1
Answer: C
A, D, and E can be ruled out as incorrect by simple reasoning. “B” is also incorrect because interest in the first year would be Loan amount × interest rate regardless of the life of the loan, so the interest payment would be identical for the first payment. Think about the situation where r = 0%, statement “C” is the "most logical guess." One could also set up an amortization schedule and change the numbers to confirm that only c is correct. Question 2

Answer: C
To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is essentially a trial and error procedure that is easy with a computer or financial calculator but difficult otherwise. Question 3

Answer: D
Effect Annual Rate of Riverside Bank:
rR = (1 + (0.065 / 12)) ^ 12 = 1.067
Effective Annual rate of Midwest Bank
rM = (1 = (0.07 / 1)) ^ 1 = 1.07
Effective Annual Rate of Midwest Bank is higher by (1.07 – 1.067) 0.003 or 0.3%

Question 4
Answer: A
8 i (interest earned)
46 n (periods remaining)
-2500 pmt (payment made into the account each period)
0 PV (starting balance of account)
solve for FV
FV = $1,129,750.38

We can now use this value to solve backwards

8 i
41 n (only 41 more payments here)
0 PV (starting balance)
1,129,750.38 FV (ending value)
solve for pmt
pmt = 3,725.55 ~ 3,726

Question 5
Answer: D
They need to study:
14,500 * ((1.035)^8) + 14,500 * ((1.035)^9) + 14,500 * ((1.035)^10) + 14,500 * ((1.035)^11) = 80,479 Tuition of the beginning of t=8: 14,500 * ((1.035)^7) = 18,448.05 Tuition of the beginning of t=9: 14,500 * ((1.035)^8) = 19,093.73 Tuition of the beginning of t=9: 14,500 * ((1.035)^9) = 19,762.01 Tuition of the beginning of t=10: 14,500 * ((1.035)^10) = 20,453.68 Before study begins:

For accumulations they have: 1,500 * 1097^7 = 27,420.59
For regular additions: 5,000 * 1.09^7 + 5,000 * 1.09^6 +5,000...

...low—say $2 per share—then it can declare a ―reverse split‖ of say 1-for-25 so as to bring the price up to somewhere around $50 per share.
The stock price will decline and the quantity of shares outstanding will increase, the ratio does not matter.
4. Which of the following statements is CORRECT?
a. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm’s dividend payout.
Large investment...

...FIN534 – HomeworkChapter4
Directions: Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.
1. A $50,000 loan is to be amortized...

...FIN534 Midterm Exam 1
1. Of the following investments, which would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.
2. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment?
3. Which of the following statements regarding a 20-year...

...HomeworkChapter4, Week 3
1. A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT?
C. The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower. If the interest rate is low on a loan, the amount of repayment is low.
2. Which of the following statements is CORRECT?
C. to solve for I, one must...

...FIN534 Week 3 HW Chapter 5
1. Three $1,000 face value bonds that mature in 10 years have the same level of risk, hence their YTMs are equal. Bond A has an 8% annual coupon, Bond B has a 10% annual coupon, and Bond C has a 12% annual coupon. Bond B sells at par. Assuming interest rates remain constant for the next 10 years, which of the following statements is CORRECT?
Answer: D. Bond A sells at a discount (its price is less than par), and its...

...FIN534 Quiz 1 Week 1
Rating A
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Question 1
You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes...

...of many kinds of assets. When economies occur
the ratios are likely to remain constant over time as the size of the firm increases.
Economic Ordering Quantity model for establishing inventory levels demonstrates this
relationship.
ANSWER: C
4. Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its
FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the
company is developing its financial...

...Cinthia Gutierrez
Acc 307
HomeworkChapter4
3. Allen visits Reno, Nevada, once a year to gamble. This year his gambling loss was $25,000. He commented to you, “At least I didn’t have to pay for my airfare and hotel room. The casino paid that because I am such a good customer. That was worth at least $3,000. “What are the relevant tax issues for Allen?
Allen received something of value from the casino. Under the broad concept of income, the...