# Issue Set a couple of Mba 503

Problem Set 2

Problem P9  seventeen:

Jack Hammer

FV (Table 1) at 11% discount rate

2 . 00 x. 901 = \$1. 80

2 . 20 times. 802 sama dengan \$1. seventy nine

2 . 45 x. 731 = \$1. 75

33. 00 by. 731 = \$24. doze

--------

\$29. 46

Difficulty P9 - 22:

Alternative Present Ideals: Your abundant godfather provides offered you a choice of one of many three next alternatives: \$12, 000 right now; \$2, 500 a year to get eight years; or \$24, 000 towards the end of ten years. Answer:

(first alternative) Present value of 15, 000 received now: 15, 000 (second alternative) Present Value of annuity of two, 000 pertaining to eight years: Appendix D

PVa=AxPVifa

=2, 000xPVifa (11%, 8years)

=2, 000x5. 146

=10, 292

(third alternative) Present worth of 24, 000 received in almost 8 years Appendix B

PV= FV x PVif

=24, 000 back button PVif(11%, 8 years)

Select 24, 1000 to be received in almost 8 years

First alternative present values of 10, 500 received today 10, 000 Second  present benefit of annunity of 2, 1000 for eight years (same as previously mentioned but use 12) Issue P9  23

Payments Needed: You need \$28, 974 at the end of 10 years, and your just investment wall plug is an 8 percent long-term certificate of first deposit (compounded annually). With the certificate of put in, you make a basic investment at the start of the initially year. a. What sole payment could be made at the beginning of the 1st year to do this objective? Appendix b

PV=FV X PVif(8%, 10 periods)

=28, 974 x. 463 = 13, 415

b. What amount could you pay out at the end of each and every year yearly for a decade to achieve this same objective? Apendix C A=FVA/FV(IFA) = twenty-eight, 974/14. 487= \$2, 000

Problem P10  two:

2 . Midland Oil features \$1000 par value provides outstanding in 8 percent interest. The bonds can mature in 25 years. Figure out the current price of the a genuine if the present yield to maturity can be: 7 Percent

PVa = A times PV (n=25, i=7%)

PHOTO VOLTAIC = 70 x 11. 654

sama dengan 932. thirty-two

PV sama dengan FV x PV (n=25, i =7%)

PV = 1000 by. 184

sama dengan \$184

Present value interesting payments \$932. 32 Present value of principal repayment a maturity 184. 00 Price with the bond money 1, 116. 32

10 Percent

PVa = A x PHOTO VOLTAIC (n=25, i=10%)

PV sama dengan 80 x 9. 077

= 726. 16

PHOTOVOLTAIC = FV x PHOTOVOLTAIC (n=50, i =10%)

PHOTO VOLTAIC = a thousand x.. 092

= 92\$

Present value of interest repayments \$726. of sixteen Present worth of primary payment a maturity 80. 00 Price of the bond \$ 818. 16

13 Percent

PVa = A back button PV (n=25, i=13%)

PHOTOVOLTAIC =

PV = FV back button PV (n=25, i =13%)

PV = 1000 back button. 002

sama dengan 2

Present value appealing payments \$997. 75 Present value of principal payment a maturity 2 . 00 Price in the bond bucks 999. seventy five

Problem P10  7:

Head to Table 10â" 1 which can be based on you possess paying 10 % interest to get 20 years. Suppose interest rates on the market (yield to maturity) decline from 11 percent to 8 percent:

a. What is the bond price at eleven percent? 920. 30

w. What is the bond value at almost eight percent? 1, 196. 80

c. What would be your percentage return on investment if you bought once rates were 11 percent and distributed when prices were 8 percent?

920. 40 â" 1196. 80 = -276. a few

276. your five / 920. 30 * 100 = 30 %

Difficulty P10 - 19:

North Pole Cruiselines issued preferred stock several years ago. That carries a set dividend of \$6 every share. With the passage of time, yields possess soared through the original 6 percent to 14 percent (yield is equivalent to required rate of return). a. The thing that was the original concern price? \$5. 66

Pp = Dp / (1 + Kp) 1

Pp sama dengan 6. 00 / (1 +. 06)1= 5. 66

b. Precisely what is the current worth of this desired stock? dollar 5. twenty six Pp sama dengan Dp as well as (1 & Kp) one particular

Pp = 6. 00 / (1 +. 14) = a few. 26

c....