finance problems
Question # 00003691
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Updated on: 11/18/2013 02:31 PM Due on: 11/27/2013
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a local brokerage firm, and her boss is selling securities that call for 4 payments of $50 (1 payment at the end of each of the next 4 years) plus an extra payment of $1,000 at the end of Year 4. Your friend says she can get you some of these securities at a cost of $875 each. Your money is now invested in a bank that pays an 8% nominal (quoted) interest rate but with quarterly compounding. You regard the securities as being just as safe, and as liquid, as your bank deposit, so your required effective annual rate of return on the securities is the same as that on your bank deposit. You must calculate the value of the securities to decide whether they are a good investment. What is their present value to you? Round your answer to the nearest cent.
$
•
Your company is planning to borrow $1,750,000 on a 7year, 10%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.
%
Problem
To complete your last year in business school and then go through law school, you will need $15,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $15,000 one year from today). Your rich uncle offers to put you through school, and he will deposit in a bank paying 4.24% interest a sum of money that is sufficient to provide the 4 payments of $15,000 each. His deposit will be made today.
a. How large must the deposit be? Round your answer to the nearest cent.
$
b. How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent.
$
How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent.
$
Problem
Find the present value of the following ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to "BEG," press FV, and find the FV of the annuity due.)
a. $800 per year for 10 years at 12%.
$
b. $400 per year for 5 years at 6%.
$
c. $800 per year for 5 years at 0%.
$
Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
d. $800 per year for 10 years at 12%.
$
e. $400 per year for 5 years at 6%.
$
f. $800 per year for 5 years at 0%.
$
Problem
Find the interest rate (or rates of return) for each of the following situations. Round your answers to two decimal places.
a. You borrow $700 and promise to pay back $728 at the end of 1 year.
%
b. You lend $700 and receive a promise to be paid $728 at the end of 1 year.
%
c. You borrow $70,000 and promise to pay back $121,305 at the end of 13 years.
%
d. You borrow $10,000 and promise to make payments of $2,445.7 at the end of each year for 5 years.
%
Problem
What's the future value of a 4%, 6year ordinary annuity that pays $750 each year? Round your answer to the nearest cent.
$
If this were an annuity due, what would its future value be? Round your answer to the nearest cent.
$
Problem
a. It is now January 1. You plan to make a total of 5 deposits of $500 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 8% but uses semiannual compounding. You plan to leave the money in the bank for 5 years. How much will be in your account after 5 years? Round your answer to the nearest cent.
$
b. You must make a payment of $1,992.30 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 6% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
$
Problem
An investment will pay $200 at the end of each of the next 3 years, $400 at the end of Year 4, $500 at the end of Year 5, and $700 at the end of Year 6. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent.
$
What is its future value? Round your answer to the nearest cent.
$
Problem
To the next whole year, how long will it take $200 to double if it is deposited and earns the following rates? Round your answers up to the next highest year. [Notes: (1) If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) (2) This problem cannot be solved exactly with some financial calculators. For example, if you enter PV = 200, PMT = 0, FV = 400, and I = 7 in an HP12C, and then press the N key, you will get 11 years. The correct answer is 10.2448 years, which rounds to 10, but the calculator rounds up. However, the HP10B gives the correct answer.]
a. 7.5%.
year(s)
b. 12.7%.
year(s)
c. 15.6%.
year(s)
d. 100%.
year(s)
$
•
Your company is planning to borrow $1,750,000 on a 7year, 10%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.
%
Problem
To complete your last year in business school and then go through law school, you will need $15,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $15,000 one year from today). Your rich uncle offers to put you through school, and he will deposit in a bank paying 4.24% interest a sum of money that is sufficient to provide the 4 payments of $15,000 each. His deposit will be made today.
a. How large must the deposit be? Round your answer to the nearest cent.
$
b. How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent.
$
How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent.
$
Problem
Find the present value of the following ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to "BEG," press FV, and find the FV of the annuity due.)
a. $800 per year for 10 years at 12%.
$
b. $400 per year for 5 years at 6%.
$
c. $800 per year for 5 years at 0%.
$
Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
d. $800 per year for 10 years at 12%.
$
e. $400 per year for 5 years at 6%.
$
f. $800 per year for 5 years at 0%.
$
Problem
Find the interest rate (or rates of return) for each of the following situations. Round your answers to two decimal places.
a. You borrow $700 and promise to pay back $728 at the end of 1 year.
%
b. You lend $700 and receive a promise to be paid $728 at the end of 1 year.
%
c. You borrow $70,000 and promise to pay back $121,305 at the end of 13 years.
%
d. You borrow $10,000 and promise to make payments of $2,445.7 at the end of each year for 5 years.
%
Problem
What's the future value of a 4%, 6year ordinary annuity that pays $750 each year? Round your answer to the nearest cent.
$
If this were an annuity due, what would its future value be? Round your answer to the nearest cent.
$
Problem
a. It is now January 1. You plan to make a total of 5 deposits of $500 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 8% but uses semiannual compounding. You plan to leave the money in the bank for 5 years. How much will be in your account after 5 years? Round your answer to the nearest cent.
$
b. You must make a payment of $1,992.30 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 6% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
$
Problem
An investment will pay $200 at the end of each of the next 3 years, $400 at the end of Year 4, $500 at the end of Year 5, and $700 at the end of Year 6. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent.
$
What is its future value? Round your answer to the nearest cent.
$
Problem
To the next whole year, how long will it take $200 to double if it is deposited and earns the following rates? Round your answers up to the next highest year. [Notes: (1) If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) (2) This problem cannot be solved exactly with some financial calculators. For example, if you enter PV = 200, PMT = 0, FV = 400, and I = 7 in an HP12C, and then press the N key, you will get 11 years. The correct answer is 10.2448 years, which rounds to 10, but the calculator rounds up. However, the HP10B gives the correct answer.]
a. 7.5%.
year(s)
b. 12.7%.
year(s)
c. 15.6%.
year(s)
d. 100%.
year(s)

Rating:
5/
Solution: finance problems