well-known commercial banks. Bank | APR | Number of Times Compounded | National First | Prime Rate + 6.75% | Semiannually | Regions Best | 13.17 | Monthly | 1. Assuming that AirJet Parts‚ Inc. is considering loans from National First and Regions Best‚ what are the EARs for these two banks? Hint for National Bank: Go to the St. Louis Federal Reserve Board’s website (http://research.stlouisfed.org/fred2/). Select “Interest Rates” and then “Prime Bank Loan Rate”. Use the latest MPRIME
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Return * N = amount of years * I% = x (what we’re trying to find) * PV = How much it’s worth today * FV = How much it’s worth at maturity date * Discount bonds pay no interest during it’s life‚ the interest you receive is part of the final payment (FV) * The interest rate is also known as the discount rate * The rate that makes us indifferent between present and future amounts (in any pattern). If we use the appropriate discount rate to calculate the present
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EAR. National first is also only compounded semiannually making it lower then Regions Best. The only thing I worry about it the prime rate changing because if it rises a lot then it could possibly become a higher interest rate them Regions best. At the time being if Air jets Best Inc. takes the National First option then that is 3.74 percent less they would be paying if they had gone with Regions Best. This would be the better option because you will pay less interest over time for the loan amount.
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with a careful discussion of interest rates‚ which will enable us precisely to quantify the returns that investors receive on their investments. We then study enough of the Capital Asset Model to understand how much extra return investors demand when they make a risky investment. We can convert cash today into cash tomorrow by lending it: if I lend $X for a year today at R% then I get $X + R × X = $X (1 + R) (2.1) back at the end of the year. The interest rate R compensates me for two
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Value of Money (TVM) Assignments: 1. Calculating Interest Rates In 2011‚ the automobile industry announced the average vehicle selling price in the United States was $28‚835. Five years earlier‚ the average price was $21‚608. What was the annual increase in vehicle selling price? *** Enter 5 N Solve for 2. I/Y 5.94% N Solve for 5.5% I/Y 80 10% I/Y Solve for $150‚000 $40‚000 PV PMT FV $1‚000‚000 PV PMT FV $488.19 Calculating Interest Rates and Future Values In 1895‚ the first U.S
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are two years apart in age; one will begin college 15 years from today and the other will begin 17 years from today. You estimate your children’s college expenses to be $21‚000 per year per child‚ payable at the end of each school year. The annual interest rate is 15%. Your deposits begin one year from today. You will make your last deposit when your oldest child enters college. (15 points) How much money must you deposit in an account to fund your children’s education? 2) My spouse
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this chapter is likely to be at best a refresher.1 This chapter covers • Net present value (NPV) • Internal rate of return (IRR) • Payment schedules and loan tables • Future value • Pension and accumulation problems • Continuously compounded interest Almost all fi nancial problems center on fi nding the value today of a series of cash receipts over time. The cash receipts (or cash fl ows‚ as we will call them) may be certain or uncertain. The present value of a cash fl ow CFt anticipated
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it is important for portfolio managers like Kimi Ford to carefully assess the assumptions that are needed to calculate the cost of capital of Nike. Cost of Debt and Equity Cohen’s calculation for finding the cost of debt for Nike was “total interest expense divided by average debt balance”. I believe this isn’t a good enough calculation because the investors want to know the cost of debt on new debt‚ not on already outstanding debt. So to calculate a better cost of debt‚ I used the 20-year Nike
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C. 1.40. D. 2.10. Portfolio beta = (W1 x B1) + (W2 x B2) = (.5 x 1.4) + (.5 x .70) = 1.05 1 Finance 316 practice problems for final exam 8. According to CAPM estimates‚ what is the cost of equity for a firm with beta of 1.5 when the risk-free interest rate is 6% and the expected return on the market portfolio is 15%?
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17 15.29 Interest Rate Options vs. FRAs 15.30 Interest Rate Caps and Floors 15.31 Minimum and Maximum Values for Options 15.32 Straddles and Strangles 15.33 Option Prices and the Time to Expiration Derivatives - Interest Rate Caps and Floors Interest Rate Cap An interest rate cap is actually a series of European interest call options (called caplets)‚ with a particular interest rate‚ each of which expire on the date the floating loan rate will be reset. At each interest payment date
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