FINC 5000 Homework Assignment for Week 2:
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Link Below To Buy:
1-What is it necessary to know about
itme value of money of money consptes?why can’t you just make about future cash
flows based purely on the size of the cash flow?
2-Define future value
3-Define present value
4.What are annuities?
5. (calculating future value) You buy an 7 year, 8%
CD for $1,000. Interest is compounded annually. How much is it worth at
maturity?
6. (calculating present value) What's the present
value of $10,000 to be received in 5 years? (Your required rate of return is 8%
a year.)
7. (calculating the rate of return) A friend
promises to pay you $600 three years from now if you loan her $500 today. What
interest rate is your friend offering you?
8. (calculating the future value of an annuity) If
you invest $100 a year for 20 years at 5% annual interest, how much will you
have at the end of the 20th year?
9. (calculating the present value of an annuity)
How much would you be willing to pay today for an investment that pays $700
a
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year at the end of the next 5 years? (Your
required rate of return is 8% a year.)
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10. (Rate of return of an annuity) You would like
to have $1,000,000 40 years from now, but the most you can afford to invest
each year is $1,200.
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What annual rate of return will you have to earn
to reach your goal?
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11. (Monthly compounding) If you bought a $1,000
face value CD that matured in nine months, and which was advertised as paying
6%
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annual interest, compounded monthly, how
much would you receive when you cashed in your CD at maturity?
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12. (Annualizing a monthly rate) Your credit card
statement says that you will be charged 1.02% interest a month on unpaid
balances.
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What is the Effective Annual Rate (EAR) being
charged?
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13. (Monthly loan payment) Best Buy has a
flat-screen HDTV on sale for $1,699. If you could borrow that amount from
Carl's Credit Union at 6% for 1 year
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what would be your monthly loan payments?
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14. (PV of a perpetuity) If your required rate of
return was 12% a year, how much would you pay today for $100 a month
forever?
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(that is, the stream of $100 monthly payments goes
on forever, continuing to be paid to your heirs after your death)
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15. (PV of an uneven cash flow stream) what is the
PV of the following project?
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(Assume r = 8%)
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16. (FV of an uneven cash flow stream) what is the
FV at the end of year 4 of the following project?
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(Assume r = 8%)
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Year Cash Flow
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1 $1,000
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2 $2,000
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3 $3,000
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4 $4,000
17.Define the Capital Asset pricing Model (CAPM).
18.Define “beta”as it applies to common stocks.
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19. You have two stocks in your portfolio. $30,000
is invested in a stock with a beta of 0.6 and $50,000 is invested in a
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stock with a beta of 1.4. What is the beta of your
portfolio?
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20. If the risk-free rate is 1% and the expected
rate of return on the stock market is 7%,
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what is the required rate of return on a stock
with a beta of 1.3 according to the CAPM?
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