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    Assignment # 2

    Uploaded by

    Kiran Kashif

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Assignment # 2

    Uploaded by

    Kiran Kashif
    3 views3 pages

    Original Title

    assignment # 2 (1)

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    3 views3 pages

    Assignment # 2

    Uploaded by

    Kiran Kashif

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    1.

    An investor deposits $100 into his credit union account that pays interest at the rate of
    3.25% per year (payable at the end of each year). He leaves the money and all accrued
    interest in the account for 7 years. How much will he have at the end of the 7 years?

    2. What is the future value in SEVEN years if you receive $300 in two years and $500 at the
    end of five years? Assume an annual compound rate of 8.5%.

    3. What is the value of $2000after one year, if bank compounding half yearly and offered rate
    is 10%?

    4. What is the value of $2000 after one year if bank compounding quarterly and offered rate is
    10%?

    5. What is the value of $2000after one year if bank compounding monthly and offered rate is
    10%?

    6. What is the present value of $700 to be received in two equal installments ($350 each), two
    years and five years from today, when the annual discount rate is 10%?

    7. Suppose Capitol Federal Bancorp offers a certificate of deposit that pays $10,000 in five
    years for exchange for $8,000 today. What interest rate is Capitol Federal Bancorp offering?

    8. Suppose Bank One offers a certificate of deposit that pays $5,000 in four years for exchange
    for $4,000 today. What interest rate is Bank One offering?

    9. How many years will take $10,000 to grow to $20,000 if bank offered rate is 10%?

    10. How many years will take $25,000 to grow to $120,000 if bank offered rate is 18%?

    11. Suppose you save $4,000 per year at the end of each year for 3 years and earn 5% interest
    per year. How much will you have at the end of 3 years?

    12. Suppose you save $4,000 per year at the end of each year for 10 years and earn 8.5%
    interest per year. How much will you have at the end of 10 years?

    13. Suppose you save $1,000 per year at the beginning of each year for 3 years and earn 5%
    interest per year. What is the present value of this annuity?
    14. Suppose you save $500 per year at the end of each year for 15 years and earn 8.25%
    interest per year. What is the present value of this annuity?

    15. Suppose that the constant and perpetual cash flow is $1,000 and the discount rate is 8%.
    What is the value of this perpetuity?

    16. Suppose that the constant and perpetual cash flow is $1,000 and the discount rate is 10%.
    What is the value of this perpetuity?

    17. 5-year bond with a coupon rate of 4% has a face value of $1000. What is the annual interest
    payment?

    18. 3-year bond with 10% coupon rate and $1000 face value yield to maturity is 8%. Assuming
    annual coupon payment, calculate the price of the bond.

    19. 10-year bond with 12.5% coupon rate and $1000 face value yield to maturity is 14.5%.Assuming
    annual coupon payment, calculate the price of the bond.

    20. four-year bond has an 8% coupon rate and a face value of $1000. If the current price of
    the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest
    payments).

    21A ten -year bond has an 10% coupon rate and a face value of $1000. If the current price of the
    bond is $1150, calculate the yield to maturity of the bond (assuming annual interest payments).

    22 If current price of stock is $25 and you hold it for one year and received dividend of
    $2.5.You sold it at $27. How much return you received? Show dividend yield and capital
    gainseparately.

    23 If investor required return is 20% and capital gain is 8% how much dividend company
    should pay?

    24 Current price of stock is $20 and expected price after one year is 22.5. If investor
    required return is 18%. What percentage of dividend should company pay?

    25You own a stock that will start paying $0.50 annually at the end of the year. It has zero
    growth in future. If the required rate of return is 14%, what should you pay per share?

    26 You own a stock that will start paying $0.50 annually at the end of the year. It will then
    grow each year at a constant annual rate of 5%. If the required rate of return is 14%, what
    should you pay per share?

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