TIME VALUE OF MONEY
1. You invested $1,000 at 4% compounded annually. How much interest was earned in year 5?

2. Gianni invested $10,000 at a rate of 6% compounded annually. How long will it take for the investment to grow to $40,000 3. What is the present value of an income stream which has a negative flow of $100 per year for each of the next 3 years, and a positive flow of $300 per year in years 4 through 7, if the appropriate discount rate is 10%?

BONDS

1. The current market price of McGill Corporation's 10 percent, 10 year bonds is $1,297.58. A 10 percent coupon interest rate is paid semiannually, and the par value is equal to $1,000. What is the YTM (stated on a nominal, or annual, basis) if the bonds mature 10 years from today?

2. A 6-year bond that pays 8 percent interest semiannually sells at par. Another 6-year bond of equal risk pays 8 percent interest annually. Both bonds are not callable. What is the price of the bond that play annual interest?

STOCKS

1. A company has just paid a dividend of $1.40 per share. Dividends are expected to grow at a rate of 5% per year for the foreseeable future. If the required return is 10%, what is the value of one share of the company’s stock.

2. Superior Enterprises has just paid a dividend of $1.05 and will pay $1.10 next year. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return if the stock is selling for $30 today?

3. Junkies Corporation has just paid a dividend of $0.90. Dividends are expected to grow at 20% for years one and two, 15% for years three and four, 10% for years five and six, and 5% thereafter. What is the expected dividend for year 10 if the required return is 18 percent?

4. The stock of SuperGrowth, Inc. just paid a dividend of $0.78. What is the expected capital gains yield if the stock is selling for $28.25 today and the required rate of return is 15 percent?

...SCHOOL OF BANKING AND FINANCE
QUESTIONS The Valuation of a Firm’s Securities Please note that some answers are exact when rounded to 2 or 3 decimal places because of the use of PV tables rather than calculators. Multiple-choice Questions Bond Valuation 1. One of the basic relationships in interest rate theory is that, other things held constant, for a given change in the required rate of return, the __________ the time to maturity, the __________ the change in price. a....

...Starting Right Company, which targets the upper class market.
* To differentiate the product from its competitors, the company offers frozen baby foods with no preservatives while ensuring great taste.
* Julia Day hired people with experience in finance, marketing and production. The group started to develop product samples of the new frozen baby food.
* Julia decided that each investment should be in blocks of $30,000. In addition, to become an eligible investor,...

...Please help with the assignment below.
Finance 100 Week 6 Homework 1 Chapter 10
P2
2. Judy Johnson is choosing between investing in two Treasury securities that mature in five years and have par values of $1,000. One is a Treasury note paying an annual coupon of 5.06 percent. The other is a TIPS which pays 3 percent interest annually.
a. If inflation remains constant at 2 percent annually over the next five years, what will be Judy's annual interest income from the...

...1. Stiles Corporation issues a new series of bonds on January 1, 1982. The bonds were sold at part ($1000), had a 12% coupon, and matured in 30 years, on December 31, 2011. Coupon payments are made semiannually (on June 30 and December 31).
a) What was the YTM on January 1, 1982? - Explain
b) What was the price of the bonds on January 1, 1987, 5 years later, assuming that interest rates had fallen to 10%? (Show in equation form, plug all the relevant numbers and without calculation, say...

...1. Refer to the following information:
Stock | E(r) | | Correlation Coefficients |
1 | 0.06 | 0.20 | 1 with 2: -0.10 |
2 | 0.08 | 0.10 | 1 with 3: +0.60 |
3 | 0.15 | 0.15 | 2 with 3: +0.05 |
A portfolio is formed as follows: sell short $1,000 of Stock 1; buy $1,500 of Stock 2; buy $1,500 of Stock 3. The investor uses $1,000 of his own equity, with the remaining amount borrowed at a risk-free interest rate of 4% (with continuous compounding).
(a) Assuming that there are...

...LONG TERM SOURCES OF FINANCE WITH REFERENCE TO INDIA
Long term sources of finance are the institutions or agencies or institutions from which finance/ funds can be raised for a long period of time. In case of sole-proprietary concerns and partnership firms long term funds are generally provided by the owners themselves or by their retained profits. But in case of Companies whose financial requirements are rather large, the following are the sources...

...$2.95 per share. What are the flotation costs for issuing the preferred shares and how should this cost be incorporated into the NPV of the project being financed?
13. The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1,000 par value bonds with a 15-year maturity at a price of $951 that carry a coupon interest rate of 13.1%. If the company is in a 34% tax bracket, what is the after-tax cost of...

...Assuming an efficient market, calculate the EUR/JPY cross rates.
EUR/JPY 139.48-88
Question Five
An investor has entered into a transaction whereby he paid $0.50 and was granted right to purchase a share for $8.00 in three months time.
a) In finance derivatives terminology, what is the transaction that the investor entered into?
Call option with premium $0.50 and exercise price $8.00.
b) Calculate the break-even share price for this transaction. Does this differ...