Jack borrows $500,000 for 10 years at a fixed interest rate of i % p.a (EAR). If the debt is repaid in equal year-end payments over the 10 years, the amount of interest Jack pays in the first 5 years (years 1 to 5): Select one:

a. Is less than the interest paid in the last 5 years

b. Is greater than the interest paid in the last 5 years

c. Is equal to the interest paid in the last 5 years

Compare and examine the similarities and differences between digital and branch banking?

Explain the concept of time value of money in the context of simple interest. How would you use this in retirement planning?

Bella Inc. wishes to accumulate funds to provide a retirement annuity for its Vice President of Research, Edward Cullen. Mr. Cullen by contract will retire at the end of exactly 20 years. On retirement, he is entitled to receive an annual end-of-year payment of $35,000 for exactly 30 years. If he dies prior to the end of the 30-year period, the annual payments will pass to his heirs. During the 20-year ‘accumulation period’, Bella Inc. wishes to fund the annuity by making equal annual end-of-year deposits into an account earning 7 percent interest compounded quarterly. Once the 30-year ‘distribution period’ begins, Bella Inc. plans to move the accumulated monies into an account earning a guaranteed 12 percent per year compounded annually. At the end of the distribution period the account balance will equal zero. Note that the first deposit will be made at the end of year 1 and the first distribution payment will be received at the end of year 21.

Required:

a) How large must Bella Inc.’s equal annual end-of-year deposits into the account be over the 20-year accumulation period to fund fully Mr. Cullen’s retirement annuity?

b) How much would Bella Inc. have to deposit annually during the accumulation period if it could earn 8 per cent rather than 7 percent?

c) How much would Bella Inc. have to deposit annually during the accumulation period if Mr. Cullen’s retirement annuity was perpetuity and all other terms were the same as initially described?

Richard and Sue wants to provide full funding for their 3 year old daughter who is expected to start college when she is 18. The current annual cost of a 4 year college is $38,000 which is expected to increase by 3.5% per year. They expect to earn 5% on their investment. They have already saved $13,000 in a college fund for this purpose. Calculate the additional amount they should save by the end of every year in order to accumulate funding for 4 years of college when their daughter turns 18.

answer: 10, 298 show how?

1.) Blossom, Inc., management expects the company to earn cash flows of $11,600, $15,700, $17,800, and $19,800 over the next four years. If the company uses an 7 percent discount rate, what is the future value of these cash flows at the end of year 4?

2.) Anthony Walker borrowed some money from his friend and promised to repay him $1,270, $1,320, $1,470, $1,610, and $1,610 over the next five years. If the friend normally discounts investment cash flows at 7.5 percent annually, how much did Anthony borrow?

3.) Jennifer Davis is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $2,300 every year in an IRA account, beginning at the end of this year until she reaches the age of 65. If the IRA investment will earn 11.10 percent annually, how much will she have in 40 years, when she turns 65?

4.) Linda Williams is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $4,000 each year in an IRA account until she is 65 at which time she will retire (a total of 40 payments). If Linda invests at the beginning of each year, and the IRA investment will earn 10.70 percent annually, how much will she have when she retires? Assume that she makes the first payment today.

Donald Inc. has $2 million in assets, no debt, and no cash. It is listed with 100,000 shares outstanding. Assume there is no tax.

The company decides to take out a loan of $1 million at an interest rate of 10% in order to buy back shares.

1. How many shares can it buy back? How many shares are left after the buy-back?

2. If WACC was 15% before the buy-back, what is Darrian’s WACC after the buy-back? Why?

3. What is the required rate of return by equity holders after the buy-back? Why?

You are trying to decide how much to save for retirement. Assume you plan to save $ 6, 500 per year with the first investment made one year from now. You think you can earn 9.0​% per year on your investments and you plan to retire in  31 ​years, immediately after making your last $ 6, 500 investment. a. How much will you have in your retirement account on the day you​ retire? b.​ If, instead of investing $ 6, 500 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be? c. If you hope to live for 19 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 19th withdrawal​ (assume your savings will continue to earn 9.0​% in​ retirement)? d.​ If, instead, you decide to withdraw $ 194, 000 per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER) e. Assuming the most you can afford to save is $ 1 comma 300 per​ year, but you want to retire with $ 1,000,000 in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE) How much will you have in your retirement account on the day you​ retire? The amount in the retirement account in 31 years would be ​$ nothing. ​(Round to the nearest​ cent.) b.​ If, instead of investing $ 6, 500 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be? You will need to make one lump sum investment today of ​$ nothing. ​(Round to the nearest​ cent.) c. If you hope to live for 19 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 19th withdrawal​ (assume your savings will continue to earn 9.0​% in​ retirement)? The amount you can withdraw every year in retirement is ​$ nothing. ​(Round to the nearest​ cent.) d.​ If, instead, you decide to withdraw $ 194, 000 per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER) You will exhaust your savings in nothing years.  ​(Round to two decimal​ places.) e. Assuming the most you can afford to save is $ 1 comma 300 per​ year, but you want to retire with $ 1,000, 000 in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE) You will need a return of nothing​%. ​(Round to two decimal​ places.)

The Wolfpack Corp. is a U.S. exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will depreciate against the dollar in the future, explain to Wolfpack Corp. how a forward contract and an option contract can help hedge its cash flows that are received in foreign currency.

Below is a list of prices for $1,000-par zero-coupon Treasury securities of various maturities. An 12% coupon $100 par bond pays an semi-annual coupon and will mature in 1.5 years. What should be the YTM on the bond? Assume semi-annual interest compounding for this question. Maturity (periods) Price of $1,000 par bond 1 943.4 2 873.52 3 780

Please solve in Excel format and show step-by-step formulas

Not wanting to leave his beloved alma mater, Will Anderson has come up with a scheme to stay around for 5 more years: He has decided to bid on the fast-food concession rights at the football stadium. He feels sure that a bid of $60,000 will win the concession, which gives him the right to sell food at football games for the next 5 years. He estimates that annual operating costs will be 40% of sales and annual sales will average $100,000. His Uncle Josh has agreed to lend him the $60,000 to make the bid. He will pay Josh $15,400 at the end of each year. His tax rate is 15%.

(a) Use a spreadsheet model to answer the following question. What is Will’s average annual after-tax profit? Assume that the yearly payments of $15,400 are tax deductible.

(b) Suppose that sales will probably vary plus or minus 40% from the average of $100,000 each year. Will is concerned about the minimum after-tax profit he can earn in a year. He feels that he can survive if it is at least $20,000. Model annual sales for the 5 years as five continuous uniform random variables. Based on a sample of 7,500 five-year periods (750 periods if using Excel alone), estimate the probability that over any five-year period the minimum after-tax profit for a year will be at least $20,000. Should Will bid for the concession?

Barry�s Steroids Company has $1,000 par value bonds outstanding at 16 percent interest. The bonds will mature in 40 years. If the percent yield to maturity is 14 percent, what percent of the total bond value does the repayment of principal represent? Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Principal as a percentage of bond price % what is the principal as a percentage bond price

Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between a grocery chain and a steel company? Think particularly about the turnover ratios, the profit margin, and the DuPont equation.