Question
In: Finance
1. You lend $900 to a friend who promises to pay you $250 at the end...
1. You lend $900 to a friend who promises to pay you $250 at the end of each of the next 4 years.
a. Draw a timeline from your perspective.
b. If you can reliably earn 4% per year, what is the net present value (NPV) of the loan?
2. You own a perpetual preferred stock issued by Goldman Sachs. If the GS preferred pays a dividend of $.80 per year and today’s market rate for this preferred is 3.0% per year, what is its current market price?
3. If the dividend of the preferred stock described in Q #2 is scheduled to increase 1.0% per year, what is its current market price?
4. You won the New York Get Rich Quick Lottery, and you must decide if you should take a LUMP sum of $25 million now or an ANNUITY of $2,000,000 per year for 20 years. a. If you can reliably earn 3% per year, which option is better? b. If you can reliably earn 6% per year, which option is better?
5. An APR reflects __________ interest only; but an EAR includes _________ interest.
Solutions
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jeff jeffy answered 4 months agoRelated Solutions
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If you buy the annuity,...
Suppose that you lend your friend $40,000 today and you friend agrees to pay you $14,295...
Suppose that you lend your friend $40,000 today and you friend
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What annual rate of return (r) will you earn if you make this
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you lend a friend 25,000, which your friend will repay in 14 equal annual end of...
you
lend a friend 25,000, which your friend will repay in 14 equal
annual end of year payments of $4,000 w/ the first payment to be
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Someone promises to pay you $1,000,000 every year (at the end of the year) for the...
Someone promises to
pay you $1,000,000 every year (at the end of the year) for the next
15 years. The first payment will be one year from today. The
relevant effective annual interest rate is 7.0%. What does the time
line look like for this problem? What would you pay, today, for
this promise?
For
this we have to calculate the present value of the total cash
inflow at interest rate of 7% for 15 years formula for this =...
Someone promises to pay you $1,000,000 every year (at the end of the year) for the...
Someone promises to pay you $1,000,000 every year (at the end of
the year) for the next 15 years. The first payment will be one year
from today. The relevant effective annual interest rate is 7.0%.
What does the time line look like for this problem? What would you
pay, today, for this promise?
1. Answer the following finance questions, a. If you lend $1,000 to a friend for 3...
1. Answer the following finance questions,
a. If you lend $1,000 to a friend for 3 years at an interest
rate of 3%, how much will she owe you as balloon payment at the
end? This is a balloon loan with all payment at the end of the
loan's term. Round to the nearest cent.
b. If you borrow $8,000 for 6 years at an interest rate of 6%,
what are the annual payments you'd have to make to pay...
If Pete borrows $250 from his sister and promises to pay back the borrowed money and...
If Pete borrows $250
from his sister and promises to pay back the borrowed money and all
interest payments in 3 years with annual interest rate of 4.91%.
Three years later, how much will Pete need to pay back to his
sister?
Please round your
answer to the second decimal without dollar sign or comma. E.g.
1234.56
Your friend offers to pay you an annuity of $8,500 at the end of each year...
Your friend offers to pay you an annuity of $8,500 at the end of
each year for 3 years in return for cash today. You could earn 5.5%
on your money in other investments with equal risk. What is the
most you should pay for the annuity?
Say you are an insurance company manager who issued a zero-coupon bond that promises to pay...
Say you are an insurance company manager who issued a
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today. The present value (PV) of the obligation today is
$10,000.
(2) What is the YTM of this obligation?
(8) You wish to fund the obligation using the following 2
bonds:
Bond A:
Maturity: 13 years
Coupon rate: 5.29% (Annually)
Price: $1200
Bond B:
Maturity: 2 years
Coupon rate: 0.5% (Annually)
Price: $800
Find the optimal weights for...
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first four years with a fixed interest rate of 15% compounded
annually. Your friend tries to bargain for a 13% charged for the
remaining periods. What should be the annual repayment for the last
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