aboriginal

aboriginal

   Compute the present value of a $130 cash flow for the following combinations of discount rates and times:(Do not round intermediate calculations. Round your answers to 2 decimal places.)

 

      Present Value
  a. r = 8%, t = 10 years
  b. r = 8%, t = 20 years
  c. r = 4%, t = 10 years
  d. r = 4%, t = 20 years

 

2.     Compute the future value of a $220 cash flow for the same combinations of rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 

       Future Value
  a. r = 8%, t = 10 years
  b. r = 8%, t = 20 years
  c. r = 4%, t = 10 years
  d. r = 4%, t = 20 years

 

3.     In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1999 the granddaughters of two of the trackers claimed that this reward had not been paid. The prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest.

 

a. How much was each entitled to if the interest rate was 3%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. How much was each entitled to if the interest rate was 6%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

4.     Investments in the stock market have increased at an average compound rate of about 5% since 1902. It is now 2012.

 

a. If you invested $1,000 in the stock market in 1902, how much would that investment be worth today?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If your investment in 1902 has grown to $1 million, how much did you invest in 1902? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
 

5.     In mid-2010 a pound of apples cost $1.16, while oranges cost $1.00. Ten years earlier the price of apples was only $.87 a pound and that of oranges was $.65 a pound.

 

a. What was the annual compound rate of growth in the price of the two fruits? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. If the same rates of growth persist in the future, what will be the price of apples in 2030? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. What about the price of oranges? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

6.     a. If you take out an $8,200 car loan that calls for 60 monthly payments starting after 1 month at an APR of 12%, what is your monthly payment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the effective annual interest rate on the loan? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

7.     You can buy property today for $2 million and sell it in 4 years for $3 million. (You earn no rental income on the property.)

 

a. If the interest rate is 6%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)
b. Is the property investment attractive to you?
c-1. What is the present value of the sales price, if you also could earn $100,000 per year rent on the property? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)
c-2. Is the property investment attractive to you?

 

8.     A factory costs $430,000. You forecast that it will produce cash inflows of $135,000 in year 1, $195,000 in year 2, and $330,000 in year 3. The discount rate is 12%.

 

a. Calculate the PV of cash inflows. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
 

9.     If the interest rate this year is 7.2% and the interest rate next year will be 9.2%, what is the future value of $1 after 2 years? What is the present value of a payment of $1 to be received in 2 years? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

 

   
  Future value $
  Present value $

 

10.   A 6-year Circular File bond pays interest of $40 annually and sells for $956. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Round “Coupon rate” to 1 decimal place and “Yield to maturity” to 2 decimal places.)

 

Coupon rate          %

Yield to maturity      %


 

11.  A bond has 12 years until maturity, a coupon rate of 7.4%, and sells for $1,107.

 

a. What is the current yield on the bond? (Round your answer to 2 decimal places.)

 

  Current yield   %

 

b. What is the yield to maturity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

    Yield to maturity  %  
 

12.  General Matter’s outstanding bond issue has a coupon rate of 9.8%, and it sells at a yield to maturity of 8.20%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Round your answer to 2 decimal places.)