Chapter 4
29.Annuity Present Values What is the value today of a 15-year annuity that pays $500 a year?The annuity’s first payment occurs at the end of year 6. The annual interest rate is 12 percentfor years 1 through 5, and 15 percent thereafter. (Ross, Stephen A.. Corporate Finance, 8th Edition. Irwin/McGraw-Hill, 112006. 4.8).

33.Growing Annuity Southern California Publishing Company is trying to decide whether to revise its popular textbook, Financial Psychoanalysis Made Simple. The company has estimated that the revision will cost $50,000. Cash flows from increased sales will be $12,000the first year. These cash flows will increase by 6 percent per year. The book will go out of print five years from now. Assume that the initial cost is paid now and revenues are received at the end of each year. If the company requires an 11 percent return for such an investment, should it undertake the revision? (Ross, Stephen A.. Corporate Finance, 8th Edition. Irwin/McGraw-Hill, 112006. 4.8).

37Calculating Annuity Present Values You want to borrow $45,000 from your local bank tobuy a new sailboat. You can afford to make monthly payments of $950, but no more. Assumingmonthly compounding, what is the highest APR you can afford on a 60-month loan? (Ross, Stephen A.. Corporate Finance, 8th Edition. Irwin/McGraw-Hill, 112006. 4.8).

41.EAR versus APR You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year mortgage for 80 percent of the $1,600,000 purchase price. The monthly payment on this loan will be $10,000. What is the APR on this loan? The EAR? (Ross, Stephen A.. Corporate Finance, 8th Edition. Irwin/McGraw-Hill, 112006. 4.8).

Chapter 5
11.Bond Yields Stealers Wheel Software has 8.4 percent coupon bonds on the market with nine years to maturity. The bonds make semiannual payments and currently sell for 104 percent of par. What is the current yield on the bonds? The YTM? The effective annual yield? (Ross, Stephen...

...Chapter4
15. For discrete compounding, to find the EAR, we use the equation:
EAR = [1 + (APR / m)]m – 1
= .0719, or 7.19%
EAR = [1 + (.07 / 4)]4 – 1
EAR = [1 + (.16 / 12)]12 – 1
= .1723, or 17.23%
= .1163, or 11.63%
EAR = [1 + (.11 / 365)]365 – 1
To find the EAR with continuous compounding, we use the equation:
EAR = er – 1
EAR = e.12 – 1 = .1275, or 12.75%
23.
Although the stock and bond accounts have different interest...

...quarterly interest is probably better. It is better to receive compound interest if you plan in keeping money in your savings for 10 years. With a compound interest savings account, you make interest on your interest. With other accounts you do not.
4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? (3-6 sentences. 2.0 points)
I would want an account that...

...Chapter4
1.
If you invest $1000 today at an interest rate of 10% per year, how much will you have 20 years from now,
assuming no withdrawals in the interim?
SOLUTION:
n
PV
FV
PMT
Result
20
2.
i
10
1000
?
0
FV =6,727.50
a.
If you invest $100 every year for the next 20 years, starting one year from today and you earn interest
of 10% per year, how much will you have at the end of the 20 years?
b. How much must you...

...Chapter4
Exchange Rate Determination
Lecture Outline
Measuring Exchange Rate Movements
Exchange Rate Equilibrium
Demand for a Currency
Supply of a Currency for Sale
Equilibrium
Factors that Influence Exchange Rates
Relative Inflation Rates
Relative Interest Rates
Relative Income Levels
Government Controls
Expectations
Interaction of Factors
Speculating on Anticipated Exchange Rates
Chapter Theme
This chapter...

...Introduction
In this report, I will analyze the financial performance of SDB by comparing it with its industry peers. SDB’s asset quality, earnings capability and capital adequacy are the three aspects I will pay attention to when evaluate its financial performance. Then I will discuss whether it is appropriate for Newbridge to pay 1.6 times book value for 18% shares in SDB. And what is appropriate range for the price Newbridge can offer. The objective of this report it to assist...

...as inflation limits or money supply constraints). According to the International Monetary Fund following four categories of exchange rate policies are adopted by most of the South East Asian countries.
1) Pegged
2) Crawling Peg
3) Managed Float
4) Free Float
Vietnam is officially maintaining a crawling peg policy which allows its currency to adjust in value with respect to an undisclosed bundle of currencies within a specified range each day. This policy allows the...

...long-term debt to finance productive assets.
After the productive assets have been purchased and the business is operating, the firm will try to produce products at the lowest possible cost while maintaining quality. This means buying raw materials at the lowest possible cost, holding production and labor costs down, keeping management and administrative costs to a minimum, and seeing that shipping and delivery costs are competitive. In addition, the firm must manage its...

...death. Insurance helps individuals and companies manage risk and preserve wealth. By insuring a large number of people, insurance companies can operate profitably and at the same time pay for claims that may arise. Insurance companies use statistical analysis to project what their actual losses will be within a given class. They know that not all insured individuals will suffer losses at the same time or at all. BrokeragesA brokerage acts as an intermediary between buyers and...

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