FINC600 Week 1 Assignment - Homework Problems

 FINC600 Week 1 Assignment - Homework Problems 

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Assignment Instructions

Complete the following problems in Microsoft Excel. Your work must be completed in the attached template.

Chapter 1: 1-6, 1-8

Chapter 2: 2-9, 2-12Chapter 3: 3-3, 3-4

Computations must be solved using Excel. Show all your work to earn partial credit. Essay questions require references.Submit to Assignments by midnight ET, Day 7 (Sunday).

1-6

In most large corporations, ownership and management are separated. What are the main implications of this separation?

1-8

We can imagine the financial manager doing several things on behalf of the firm’s stockholders. For example, the manager might:

a. Make shareholders as wealthy as possible by investing in real assets.

b. Modify the firm’s investment plan to help shareholders achieve a particular time pattern of consumption.

c. Choose high- or low-risk assets to match shareholders’ risk preferences.

d. Help balance shareholders’ checkbooks.

But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?

2-9

A. The cost of an automobile is $10,000. If the interest rate is 5%, how much would you have to set aside now to provide this sum in five years?

B. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you set aside today to cover these bills?

C. You have invested $60,476 at 8%. After paying the above school fees, how much would you remain at the end of six years?

2-12

What is the PV of $100 received in:

A. Year 10 (at a discount rate of 1%)

B. Year 10 (at a discount rate of 13%)

C. Year 15 (at a discount rate of 25%)

D. Each of years 1 through 3 (at a discount rate of 12%)?

3-3

In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5965%. Recognizing that coupons are paid semiannually, calculate the bond's price.

3-4

Here are the prices of three bonds with 10-year maturities:                                        

                                                                               

                                                                               

                Bond Coupon (%)            Price (%)                                             

                2              81.62                                    

                4              98.39                                    

                8              133.42                                  

                                                                               

If coupons are paid annually, which bond offered the highest yield to maturity?

Which had the lowest?

Which bonds had the longest and shortest durations?