- Description

Compute the present value of a $260 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Compute the future value of a $280 cash flow for the same combinations of rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 2002 the granddaughters of two of the trackers claimed that this reward had not been paid. The prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest.

a-1. Calculate the present value of an annual payment of $1,250 you would received for 11 years if the interest rate is 4%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2. Calculate the present value of an annual payment of $1,050 you would received for 16 years if the interest rate is 4%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-3. Which option would you prefer?

b-1. Calculate the present value of an annual payment of $1,250 you would received for 11 years if the interest rate is 16%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. Calculate the present value of an annual payment of $1,050 you would received for 16 years if the interest rate is 16%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-3. Which option would you prefer?

Find the annual interest rate. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

If you earn 4.50% per year on your bank account, how long will it take an account with $100 to double to $200? Use the log formula. **(Do not round intermediate calculations. Round your answer to 2 decimal places.)**

**If you take out an $8,600 car loan that calls for 48 monthly payments starting after 1 month at an APR of 6%, what is your monthly payment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)**

Professor’s Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $78,000 at age 65, the firm will pay the retiring professor $550 a month until death.

You can buy property today for $3.8 million and sell it in 4 years for $4.8 million. (You earn no rental income on the property.)

A factory costs $450,000. You forecast that it will produce cash inflows of $110,000 in year 1, $170,000 in year 2, and $280,000 in year 3. The discount rate is 12%.

If the interest rate this year is 7.8% and the interest rate next year will be 9.8%, what is the future value of $1 after 2 years? What is the present value of a payment of $1 to be received in 2 years? **(Do not round intermediate calculations. Round your answers to 4 decimal places.)**

**A 20-year Treasury bond is issued with face value of $1,000, paying interest of $52 per year. If market yields increase shortly after the T-bond is issued, what is the bond’s coupon rate? (Round your answer to 1 decimal place.)**

A 6-year Circular File bond pays interest of $80 annually and sells for $986. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Round “Coupon rate” to 1 decimal place and “Yield to maturity” to 2 decimal places.)

A bond has 8 years until maturity, a coupon rate of 5%, and sells for $1,065.

General Matter’s outstanding bond issue has a coupon rate of 11.2%, and it sells at a yield to maturity of 9.00%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Round your answer to 2 decimal places.)

What is the current yield of the 4.375% 2040 maturity bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

One bond has a coupon rate of 5.6%, another a coupon rate of 8.3%. Both bonds have 6-year maturities and sell at a yield to maturity of 7%.

Sure Tea Co. has issued 7.2% annual coupon bonds that are now selling at a yield to maturity of 10% and current yield of 9.9987%. What is the remaining maturity of these bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Consider three bonds with 6.2% coupon rates, all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years.

A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $106 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A bond’s credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity of 7.2%. A-rated bonds sell at yields of 7.5%. Assume a 10-year bond with a coupon rate of 6.7% is downgraded by Moody’s from Aa to A rating.

Favored stock will pay a dividend this year of $2.16 per share. Its dividend yield is 9%. At what price is the stock selling? (Do not round intermediate calculations.)

Preferred Products has issued preferred stock with an $7.26 annual dividend that will be paid in perpetuity.

Waterworks has a dividend yield of 6.50%. If its dividend is expected to grow at a constant rate of 3.50%, what must be the expected rate of return on the company’s stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Steady As She Goes, Inc., will pay a year-end dividend of $3.70 per share. Investors expect the dividend to grow at a rate of 5% indefinitely.

Integrated Potato Chips paid a $1.20 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 6% per year.

Arts and Crafts, Inc., will pay a dividend of $7 per share in 1 year. It sells at $70 a share and firms in the same industry provide an expected rate of return of 14%. What must be the expected growth rate of the company’s dividends? (Do not round intermediate calculations.)

You expect a share of stock to pay dividends of $2.00, $2.05, and $2.40 in each of the next 3 years. You believe the stock will sell for $32 at the end of the third year.

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $6 per share dividend in a year. The discount rate is 21%.

Assume that market and book values are equal for current assets, current liabilities, and debt and other long-term liabilities.

Grandiose Growth has a dividend growth rate of 20%. The discount rate is 10%. The end-of-year dividend will be $2 per share.