Finance exam 2 (work out problems)

You will receive 19 annual payments of $29,500. The first payment will be received 4 years from today and the interest rate is 5.8 percent. What is the value of the payments today?

$282,341.40

A friend wants to borrow money from you. He states that he will pay you $3,000 every 6 months for 12 years with the first payment exactly 3 years and six months from today. The interest rate is an APR of 5.3 percent with semiannual compounding. What is the value of the payments today?

$45,111.41

Your grandparents would like to establish a trust fund that will pay you and your heirs

$135,000 per year forever with the first payment 12 years from today. If the trust fund earns

an annual return of 2.6 percent, how much must your grandparents deposit today?

$3,915,069.28

You have just leased a car that has monthly payments of $330 for the next 3 years with the first payment due today. If the APR is 6 percent compounded monthly, what is the value of the payments today?

$10,901.67

Jenny Enterprises has just entered a lease agreement for a new manufacturing facility. Under the terms of the agreement, the company agreed to pay rent of $12,500 per month for the next 10 years with the first payment due today. If the APR is 6.48 percent compounded monthly, what is the value of the payments today?

$1,107,793.41

Red Sun Rising Corporation has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,300,000 for 15 years with the first payment due today. If the interest rate is 3.33 percent, what is the value of this liability today?

$15,659,951.00

You have decided to buy a car that costs $31,800. Since you do not have a big down payment, the lender offers you a loan with an APR of 6.31 percent compounded monthly for 6 years with the first monthly payment due today. What is the amount of your loan payment?

$528.90

Roger has just lost a lawsuit and has agreed to make equal annual payments of $12,700 for the next 10 years with the first payment due today. The value of this liability today is $97,000. What is the interest rate on the payments?

6.56%

You plan to save $390 per month starting today for the next 48 years "just to start the month off right." You feel that you can earn an interest rate of 9.5 percent compounded monthly. How much will there be in the account 48 years from today?

$4,611,912.71

You are set to receive an annual payment of $11,400 per year for the next 20 years. Assume the interest rate is 6.3 percent. How much more are the payments worth if they are received at the beginning of the year rather than the end of the year?

$8,040.77

Marko, Incorporated, is considering the purchase of ABC Company Marko believes that ABC Company can generate cash flows of $5,100, $10,100, and $16,300 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 13 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Company?

$23,719.77

Myca Corporation has a project with the following cash flows. What is the value of the cash flows today assuming an annual interest rate of 10.7 percent?

Year Cash Flow

1 $ 1,960

2 2,510

3 2,885

4 2,895

$7,873.25

You are in talks to settle a potential lawsuit. The defendant has offered to make annual payments of $38,000, $42,000, $86,000, and $129,000 to you each year over the next four years, respectively. All payments will be made at the end of the year. If the appropriate interest rate is 3.4 percent, what is the value of the settlement offer today?

$266,677.70

The value today of the following cash flows is $6,772.40 at an interest rate of 6.1 percent.

What is the value of the Year 3 cash flow?

Year Cash Flow

1 $ 1,710

2 1,905

3 ?question mark

4 2,580

$1,711.04

One year ago, the Jenkins Family Fun Center deposited $4,200 into an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $6,000 to this account. They plan on making a final deposit of $8,200 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a rate of return of 5 percent?

$22,145.95

Assuming an interest rate of 6.7 percent, what is the value of the following cash flows four

years from today?

Year Cash Flow

1 $ 3,325

2 4,300

3 6,210

4 8,365

$23,925.68

Assuming an interest rate of 5.8 percent, what is the value of the following cash flows five

years from today?

Year Cash Flow

1 $ 3,415

2 4,555

3 5,505

4 6,760

$22,987.52

An investment had a nominal return of 9.8 percent last year. The inflation rate was 2.9 percent. What was the real return on the investment?

6.71%

r = [(1 + .098) ÷ (1 + .029)] − 1 =

An investment had a nominal return of 9.7 percent last year. If the real return on the investment was only 7.0 percent, what was the inflation rate for the year?

2.52%

h = [(1 + .097) ÷ (1 + .070)] − 1 =

The inflation rate over the past year was 4.2 percent. If an investment had a real return of 9.4 percent, what was the nominal return on the investment?

13.99%

R = [(1 + .094) × (1 + .042)] − 1 =

Gugenheim, Incorporated, has a bond outstanding with a coupon rate of 6.3 percent and annual payments. The yield to maturity is 7.5 percent and the bond matures in 19 years. What is the market price if the bond has a par value of $2,000?

$1,760.98

Whatever, Incorporated, has a bond outstanding with a coupon rate of 5.94 percent and semiannual payments. The yield to maturity is 5.1 percent and the bond matures in 20 years. What is the market price if the bond has a par value of $1,000?

$1,104.55

Lincoln Park Company has a bond outstanding with a coupon rate of 5.72 percent and semiannual payments. The yield to maturity is 6.9 percent and the bond matures in 19 years. What is the market price if the bond has a par value of $2,000?