Suppose Your Bank Account Will Be Worth 15 000 00 In One Year The Interest Rate Discount Rate That The Bank Pays Is 7 What Is The Present Value Of Your Bank Account Today What Would The Pres Essays and Term Papers
the interestrate is 7 percent? What is the presentvalue of these cash flows? Annuity PresentValue You are looking into an investment that will pay you $12,000 per year for the next 10 years. If you require a 15 percent return, what is the most you wouldpay for this investment? APR versus EAR The...
will depend on how much you value the existing miles (which will depend on your likelihood of using them in the future).
3-6.
Suppose the risk-free interestrate is 4%. a. c. a. b. c. Having $200 today is equivalent to having what amount in oneyear? Which would you prefer, $200 today or $200...
1.08
18
= 1, 000
3
Homework #1: Solutions Fin555
4-11. Suppose you receive $100 at the end of each year for the next three years. a. If the interestrate is 8%, what is the presentvalue of these cash flows?
b. What is the future value in three years of the presentvalue...
) approximate number of days.
5. Find the amount if Php 30, 000 is invested at 14 ¼ % for 100 days using (a) exact interest, (b) ordinary interest.
6. If Mr. Cruz borrowed Php 20, 000 at the bank on October 15, 2001, what amount must he pay on April 30, 2002?
7. If money is worth 14...
Value with Daily
Compounding
You need R15 000 in 3 years for a new
car. If you can deposit money into an
account that pays an APR of 5,5% based
on daily compounding, how much would
you need to deposit?
◦ Daily rate = 0,055 / 365 = 0,00015068493
◦ Number of days = 3(365) = 1 095
◦ PV = 15000...
:2, E(~rm) = 20%,
rf = 10%, both per annum; and your expectation of the price of copper in 1 year is $1.224 per lb.
What should the futures price be if the copper market is in equilibrium?
Suppose a rm had 50,000 lbs of copper as a receivable in 1 year's time. What is its presentvalue, and
is...
amount received at the end of the period?
Exercise 5: compounded interests
Mr SMART would like to have 50 000 € by 3 years. So he saves a certain amount of money, invested once, today, on a bankaccount. The annual interestrate is 6%.
How much will he have to put today?
Exercise 6...
annually, and is discounted at a rate of 7%. What is the bond's presentvalue?
$_____________________
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p.01/14/00
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4-18
VALUING FINANCIAL ASSETS
ANSWER KEY
3.
A bond matures in oneyear and paysinterest at maturity. If the face value of the bond
is $500,000, the...
pay £1, 000(1 + 0.4t ) at the end of year t , for t equal to 5, 10, 15, 20 and 25. It values these liabilities assuming that in the future there will be a constant effective interestrate of 7% per annum. An amount equal to the total presentvalue of the liabilities is immediately invested in two...
[
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Illustration 6 Suppose you deposit Rs.1,000 annually in a bank for 5 years and your deposits earn a compound interestrate of 10% What will be value of the deposit at the end of 5 years? Assuming the each deposit occurs at the end of the year, the future value of this annuity? FVAn = Rs.1,000...
return on their investments. Suppose that a company is issuing zero-coupon bonds to raise funds for its operation. The bonds have a face value of $10,000 and a maturity of oneyear. Whatwould an investor requiring a 9% return be willing to pay for one of the bonds today? Let's apply our present...
would you pay for a 10-year bond with a par value of $1 ,000 and a 7 percent coupon rate? Assume interest is paid annually. e. How much would you pay for a share of preferred stock paying a $5-per-share annual dividend forever? f. What will be the value in 7years of $ 1 2,000 invested today? g...
The annual payment option would be the better alternative
15. What is the presentvalue of an income stream which provides Rs.30,000 at the end of yearone, Rs.50,000 at the end of year three , and Rs.100,000 during each of the years 4 through 10, if the discountrate is 9 percent...
the one-period interestratestoday are r is 5 percent and r∗ is 10 percent. Also, you are given that in the next period the spot rate will either be usd/gbp 2.2 or usd/gbp 1.8. (a) What is the valuetoday of a one-period put option on the gbp that has a strike price of usd/gbp 1.9? (b) Suppose that...
discountrate is 11 per cent. Whatwould be your choice? Will your answer change if Rs 2,310 is paid in the beginning of each year for 5 years?
8. Compute the presentvalue for a bond that promises to payinterest of Rs 150 a year for thirty years and Rs 1,000 at maturity. This first interest payment is...
:
PV FV n
(1 i)
COMPOUNDING NOW SHOWS THAT “LARGE”
SUMS TO BE PAID LATER ARE WORTH ONLY
“SMALL” SUMS NOW
What is the presentvalue of $1 million
to be paid in 100 years’ time if the
interestrate is 15% pa?
Financial Math Support Materials
Page 27 of 85
PRESENTVALUE...
, 00, 000
44. (a) R =
Since PV0 = R (PVIFAk, n) =
= Rs.16,273.79.
PVIFA
6.145
45. (b)
i.
PresentValue of Rs.20,000 received annually for 15years at 15% per annum rate of
interest.
PV = 20,000 x 5.847 = Rs.1,16,940
ii. PresentValue of lumpsum payment of Rs.1,50,000 is 1,50,000.
As, the...
the end of the year, we would have 1000 x (1.00217)
52
= 1119.315
1119.315 − 1000 = 11.93% = 11.93% 1000
The effective annual interestrate on the 2nd CD is lower than that of the first CD.
208
Part II
20.
Issue price
=
Face value N ⎞ ⎛ i 1+ ⎜ x 100 365 ⎟ ⎝ ⎠ 15, 00, 000...
Inflation
• If you invest $1 in a bank deposit offering an interestrate of r = 10%, you are promised $1 × (1+r) = $1.10 in oneyear. • However, what – you will be able to purchase in oneyear with $1.10 is less than what – you are able to purchase today with $1.10 because of inflation. • Suppose...
from this analysis? 7. In discussing a possible loan with the firm’s banker, Knight learned that the bankwould be willing to lend Office Mates up to $5,000,000 for oneyear at a 10 percent nominal, of stated rate. However, Knight failed to ask the banker about the specific terms of the loan. Assume...