2. At 9 percent interest, how long does it take to double your money? To quadruple it?

3. In 2006, a gold $3 coin minted in 1879 was auctioned for $9.000. For this to have been true, what was the annual increase in the value of the coin?

4. You can earn 0.45 percent per month at your bank. If you deposit $1.500, how long must you wait until your account has grown to $3,600?

5. You need $75,000 in 10 years. If you can earn 0.55 percent per month, how much will you have to deposit today?

6. If you put up $20,000 today in exchange for a 8.5 percent, 12-year annuity, what will the annual cash flow be?

7. Bath's Bank offers you a $50,000, seven-year term loan at 8 percent annual interest. What will your annual loan payment be?

8. Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. If the required return on this investment is 7percent, how much will you pay for the policy? Suppose Curly's told you the policy cost $400.000. At what interest rate would this be a fair deal?

9. First National Bank charges 12.4 percent compounded monthly on its business loans. First United Bank charges 12.7 percent compounded semiannually. As a potential borrower, which bank would you go to for a new loan?

10. You are to make monthly deposits of $300 into a retirement account that pays 12 percent interest compounded monthly. If your first deposit will be made one month from now. How large will your retirement account be in 30years?

11. You have an investment that will pay you 1.05 percent per month. How much will you have per dollar invested in one year? In two years?

12. You want to buy a new sports car from Muscle Motors...

...Final Exam Practice Problems
1. Firm ABC’s only outstanding debt is $100,000 worth of coupon bond (market value). Its yield to maturity is 8%. Given that its tax rate is 40%, what is its effective cost of debt?
Effective cost of debt = cost of debt * (1-tax rate) =8%*(1-40%)=4.8%
2. Firm ABC has a stock currently traded at $20. The next year’s dividend will be $0.20. The dividend growth rate is forecasted to be 6% forever. Risk-free rate is 3%, and market risk premium is...

...repaid in increasing increments through regular monthly payments.
23. An amortized loan:
A. requires the principal amount to be repaid in even increments over the life of the loan.
B. may have equal or increasing amounts applied to the principal from each loan payment.
C. requires that all interest be repaid on a monthly basis while the principal is repaid at the end of the loan term.
D. requires that all payments be equal in amount and include both principal and...

...Sample Test Problems
9.1 Which type of secondary market provides the most efficient market for securities?
9.2 Is preferred stock classified as debt or equity?
9.3 Burnes, Inc. is a mature firm that is growing at a constant rate of 5.5 percent per year. The firm’s last dividend was $1.50. If the required rate of return is 12 percent, what is the market value of this stock assuming dividend growth equals the growth rate of the firm?
9.4 Abacus Corp. will pay dividends of...

...Questions and Problems
Page 1 of 3
CorporateFinance eBook
9/e Content
Chapter8: Interest Rates and Bond Valuation
Questions and Problems
1. Valuing Bonds What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is: BASIC (Questions 1– 12) a. 5 percent? b. 10 percent? c. 15 percent? 2. Valuing Bonds Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 25...

...
3210AFE
ADVANCE CORPORATEFINANCE
Financial Analysis Report
New Hope Coal Corporation
(4780 words)
STUDENT NAME: Member 1: S2704148 zhiqi Liu
Member 2: S2682143 Sai Tie
Member 3: S2730145 Lingfeng Zhan
Member 4: S2594576 Xindan Chen
Member 5: S2700906 Yinghui Huang
TABLES
Executive summary............................................................................................3...

...Calculate the RV Division WACC using Stephens’s method in paragraph 20.
rE = rf + βequity(rm – rf)
rE = 0.0421 + 2.1(0.06)
rE = 0.1681
Using TRUST’s debt-to-equity mix of 21%:
Pre-tax divisional WACC = 0.1442 = (rD x 0.21) + (0.1681 x 0.79)
From above:
rD = 0.0543
After-tax divisional WACC = (1-0.3)(0.0543 x 0.21) + (0.1681 x 0.79)
After-tax divisional WACC = 0.1408
What could be deduced about the relative business risk of the RV Division compared to its...

...questions of corporatefinance?
a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt?
b. Financing decision (capital structure): How much cash must be raised for the
required investments?
c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills.
( Describe capital structure.
Capital structure is...

...PROBLEM SET 5:
INTEREST RATES, AMORTIZING LOANS, BOND VALUATION, STOCK VALUATION
1. A typical credit card agreement quotes an interest rate of 18 percent APR. Monthly payments are required. What is the actual interest rate you pay on such a credit card? 2. After carefully going over your budget, you have determined you can afford to pay €632 per month toward a new sports car. You call up your local bank and find out that the going rate is 1 percent per month for 48 months....

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