Finances

1035 words 5 pages

Workshop 2 Assignments

Answer the following questions:

1. The Lexington Property Development Company has a $10,000 note receivable from a customer due in three years. How much is the note worth today if the interest rate is a. 9%? b. 12% compounded monthly? c. 8% compounded quarterly? d. 18% compounded monthly? e. 7% compounded continuously?

SOLUTION: PV = FV [PVFk,n] a. PV = $10,000 [PVF9,3] = $10,000 (.7722) = $7,722 b. PV = $10,000 [PVF1,36] = $10,000 (.6989) = $6,989 c. PV = $10,000 …show more content…

Coupon Rate Time until Maturity Current Market Rate
a. 12% 15 years 10%
b. 7 5 12
c. 9 25 6
d. 14 30 9
e. 5 6 8

SOLUTION: PB = PMT [PVFAk,n] + FV [PVFk,n]

a. PB = $60 [PVFA5,30] + $1,000 [PVF5,30] = $60 (15.3725) + $1,000 (.2314) = $1,153.75

b. PB = $35 [PVFA6,10] + $1,000 [PVF6,10] = $35 (7.3601) + $1,000 (.5584) = $816.00

c. PB = $45 [PVFA3,50] + $1,000 [PVF3,50] = $45 (25.7298) + $1,000 (.2281) = $1,385.94

d. PB = $70 [PVFA4.5,60] + $1,000 [PVF4.5,60] = $70 (20.638) + $1,000 (.0713) = $1,515.96

7. What is the current yield on each of the bonds in the previous problem?

SOLUTION:

a. $120.00/$1,153.72 = .104 = 10.4%
b. $70.00/$816.00 = .086 = 8.6%
c. $90.00/$1,385.95 = .065 = 6.5%
d. $140.00/$1,515.95 = .092 = 9.2%
e. $50.00/$859.23 = .058 = 5.8%

8. The stock of Sedly Inc. is expected to pay the following dividends.

Year 1 2 3 4
Dividend $2.25 $3.50 $1.75 $2.00

At the end of the fourth year its value is expected to be $37.50. What should Sedly sell for today if the return on stocks of similar risk is 12%?

SOLUTION: Cash Flow PVF12,n PV

Related

NEW FINANCE
6700 words | 27 pages

For the exclusive use of o. sow 9-810-073 REV: JULY 15, 2013 MATTHEW RHODES-KROPF JOSH LERNER ANN LEAMON Iris Running Crane: December 2009 Iris Running Crane, HBS Class of 2010, shook the rain and soggy snow off her umbrella as she entered the lobby of Soldiers Field Park on a dark December night in 2009. “Oh the weather outside is frightful,” she whistled as she took the elevator to her apartment. Back home on the Blackfeet reservation in East Glacier, Montana, the wind would be….

Show More
Finance Mba
1472 words | 6 pages

1. Calculating Returns Suppose a stock had an initial price of $84 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $96. Compute the percentage total return. The percentage total return is (96-84+1,40)/84=0,1595=15,95% 2. Calculating Yields In Problem 1, what was the dividend yield? The capital gains yield? Capital gain yield: (96-84)/84=0,1429=14,29% Dividend yield: 1,40/84=0,167=1,67% 3. Calculating Returns and Variability You’ve….

Show More
Case Finance
937 words | 4 pages

Case Questions for MGM 828, Fall 2012 Case 1: The Euro in Crisis a) Evaluate the European Central Bank’s (ECB) response to the financial crisis of 2008-2010. What was their analysis of the problem? b) The ECB responded less aggressively than the US Federal Reserve to the crisis. Why? c) In May 2010, should the ECB agree to purchase Greek sovereign debt? Case 2: Foreign Ownership of US Treasury Securities a) Why is foreign ownership of US Treasury securities rising? It is more interesting….

Show More
EMI Corporate Finance
7276 words | 30 pages

Equity Research, June 16, 2006. Sony BMG Music Entertainment was a joint venture owned by Sony Corporation and Bertelsmann. Universal Music was owned by Vivendi. This document is authorized for use only by Carlo Adrian Portillo Cardenas in Corporate Finance - LMFI1 - Tower Bridge taught by Khaled Soufani at Hult International Business School, 2015 For the exclusive use of C. Portillo Cardenas, 2015 -3- UV1201 music), performance royalties (performances of a song on TV, radio, at a live concert,….

Show More
Finance Assignment CAPM
858 words | 4 pages

of cap-M, positive and negative aspects of Cap-M, all while drawing to the conclusion to whether Cap-M makes portfolio theory redundant. (ref:2) Definition CAPM is defined as Capital asset pricing model. It is an economic theory and is used in Finance to determine a theoretically appropriate rate of return of an asset. It is a model that describes the relationship between risk and expected return. 2,5 CAPM can be used when pricing the risk of securities. It is the….

Show More
Finance and Question
1400 words | 6 pages

Question 1 (5 points) In a world with no frictions (i.e., taxes, etc.), having debt is always better because it increases the value of the firm/project. Your Answer Score Explanation True. False. Correct 5.00 Correct. You understand the irrelevance of financing. Total 5.00 / 5.00 Question Explanation Fundamental question about value creation. Question 2 (5 points) The return of equity is equal to the return on debt of a project/firm Your Answer Score Explanation Sometimes….

Show More
Finance for Managers
861 words | 4 pages

Unit 4.9 Level 4 Finance for Managers 15 Credits Sample Assignments You are employed in a financial consultancy and one of your clients is a relatively new company that is facing rapid growth. As they began as a small family business, they have not had the level of financial control that would be expected in a business of their current size. The management team are looking to employ an accountant. Before taking this step they need to understand the reasons for recording and reporting financial….

Show More
cooperate finance
922 words | 4 pages

GSBS6130- Corporate Finance 1. Introduction Even though the operating performance of Innovative Chemical Corporation (ICC) has been outstanding, there are some problems in respect of the share price appreciation. Firstly, P/E ratio will be used to evaluate the company’s stock and factors which affect company’s P/E ratio will be listed. Furthermore, discounted dividend valuation model will be demonstrated and fundamental factors which impact the share pricing will be analysed. Finally, the value….

Show More
Ust Finance
1058 words | 5 pages

1) Frame the issue. Briefly describe that UST is planning to reverse a long-standing conservative financial policy. Issues: a) UST had seven pending health related lawsuits at the end of 1998. P.66 b) There’s previous uncertainty is enhanced by a lawsuit that alleged that UST had violated antitrust and advertising laws and participated in anti-competitive conduct. The industry agreed in November to settle state Medicaid lawsuits with a $206 billion settlement and bans on advertising and promotions….

Show More
Finance And Accounts
2317 words | 10 pages

Question 1- Analyze the following transaction under traditional approach. 18.1.2011 Received a cheque from a customer, Sanjay at 5 p.m. Rs.20,000 19.1.2011 Paid Ramu by cheque Rs.1,50,000 20.1.2011 Paid salary Rs. 30,000 20.1.2011 Paid rent by cheque Rs. 8,000 21.1.2011 Goods withdrawn for personal use Rs. 5,000 25.1.2011 Paid an advance to suppliers of goods Rs. 1,00,000 26.1.2011 Received an advance from customers Rs. 3,00,000 31.1.2011 Paid interest on loan Rs. 5,000 31.1.2011 Paid….

Show More

Popular Essays