​(Future value) Leslie​ Mosallam, who recently sold her​ Porsche, placed $8000 in a savings account paying annual compound interest of 5 percent.

a. Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 3​, 7​, and 17 ​year(s).

b.Suppose Leslie moves her money into an account that pays 7 percent or one that pays 9percent.

Rework part (a​) using 7percent and 9 percent.

c.What conclusions can you draw about the relationship between interest​ rates, time, and future sums from the calculations you just​ did?

a.After placing ​$8,000 in a savings account paying annual compound interest of 5 percent​, the amount of money that will accumulate if Leslie leaves the money in the bank for 3

​year(s) is ​$___. ​(Round to the nearest​ cent.)

If she leaves the money in the bank for 7 years, the amount of money that will accumulate is $____. ​(Round to the nearest​ cent.)

If she leaves the money in the bank for 17 years, the amount of money that will accumulate is

​$____. ​(Round to the nearest​ cent.)

b. If Leslie moves her money into an account that pays 7 percent compounded annually for 3 year(s), the amount of money that will accumulate is

​$___ . (Round to the nearest​ cent.)

If Leslie moves her money into an account that pays 7percent compounded annually for 7 years, the amount of money that will accumulate is

​$____. ​(Round to the nearest​ cent.)

If Leslie moves her money into an account that pays 7 percent compounded annually for 17 years, the amount of money that will accumulate is

​$___. (Round to the nearest​ cent.)

If Leslie moves her money into an account that pays 9 percent compounded annually for 3 year(s), the amount of money that will accumulate is

​$_____. (Round to the nearest​ cent.)

If Leslie moves her money into an account that pays 9 percent compounded annually for 7 years, the amount of money that will accumulate is

​$____. (Round to the nearest​ cent.)

If Leslie moves her money into an account that pays 9 percent compounded annually for 17 years, the amount of money that will accumulate is

​$____. ​(Round to the nearest​ cent.)

c.What conclusions can you draw about the relationship between interest​ rates, time, and future sums from the calculations you just​ did?  

There is a positive/negative relationship between the interest rate used to compound a present sum and the future value of that sum. There is a positive/negative relationship between the number of years for which the compounding continues and the future value of that sum.

Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labour needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $1,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Snowy Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 17.10 percent. The project's NPV is $___________,The project should be rejected or accepted?

16.13 Los Angeles and New York. The Bureau of Labor and Statistics publishes separate consumer price indexes for major metropolitan areas in addition to the national CPI. THe CPI (1982-84 = 100) in July 2015 was 247.1 in Los Angeles and 261.2 in New York.

(a) These numbers tell us that prices rose faster in New York than in Los Angeles between the base period and July 2015. Explain how we know this.

(b) These numbers do not tell us that prices in July 2015 were higher in New York than in Los Angeles. Explain why.

You just finished a capital budgeting investment analysis on a ​$209 million project. The​ project's life is 10 years and it will generate equal annual​ after-tax cash operating cash flows of ​$37.61 million. You assumed a ​$68 million salvage​ value, but the​ project's adjusted tax basis at termination will be ​$93 million. The project would have no effect on net working capital. With a 27​% marginal tax​ rate, the resulting NPV is ​$80.93 million. What cost of capital did you use for the​ analysis? ​ (Percent with​ 1decimal)

1) A 10-year corporate bond has a coupon rate of 6% with annual payments. If interest rates rise to 7% on similar bonds then what is the value of the bond in the marketplace?

2) A 10-year corporate bond has a coupon rate of 6% with annual payments. If interest rates rise to 5% on similar bonds then what is the value of the bond in the marketplace?

1. A 10-year corporate bond has a coupon rate of 6% with semi-annual payments. How much is the par value of this bond?

2. A 10-year corporate bond has a coupon rate of 6% with annual payments. How much in interest does the bondholder receive per year?

3. A 10-year corporate bond has a coupon rate of 6% with semi-annual payments. How much in interest does the bondholder receive per year and per interest payment?

You have $100,000 in an account that earns 2% APR (Compounded monthly)
You want to earn a higher rate of return and therefore are considering two alternative investments. You will put your $100,000 in one of the two new accounts.
Investment 1 will pay you $860 per month for starting next month 120 months.
Investment 2 will pay you $2,600 per month for starting next month 40 months.

Which account should you choose and how much does it increase your net worth?

Choose Investment 2 it increases your net worth by $528

Choose Investment 1 it increases your net worth by $544

Choose Investment 2 it increases your net worth by $508

Choose Investment 2 it increases your net worth by $547

How does the eToro Social trading model work? What is the core value or value proposition for eToro? Does it resonate with you?

7. Alset Motors is offering the 2019 Tesla Model S Sedan (basic model) for $79,900. You “wheel and deal” and get the price down to $75,000 with no money down (100%-financing). The only difficulty is that the monthly payments on the 7.2%, six-year loan are at the beginning of the month.

   1. What is the monthly payment on this loan?

   2. How much of the first payment is interest and how much is principal? (label them)

   3. How much of the sixteenth payment is interest and how much is principal? (label them)

   4. How much interest and how much principal would you pay in the loan’s second full year? (label them)

   5. How much interest and how much principal would you pay over the life of the loan? (label them)

1. You receive an inheritance of $100,000. However the terms of the bequest specify that you cannot take possession of the cash until the sum has grown to $250,000.  The money is being held in trust for you in an account that is currently paying 10%, compounded quarterly.  The bank where the account is held guarantees the rate is fixed for the first five years, but thereafter may increase, but will not decrease.  If the interest rate increases, the increase will not be more than 200 basis points (2%) above the current rate (total, ever).  What is a) the soonest, and b) the latest you will be able to claim your inheritance?

Investment A offers to pay you $10,000 per year for 10 years while Investment B offers to pay you $15,000 per year for 6 years.

a. If the annual interest rate (compounded annually) is 10%, which investment is more valuable?

b. Does your answer change if the annual interest rate (compounded annually) is 5%?

c. At what interest rate are the two investments equally attractive?

X-treme Vitamin Company is considering two investments, both of which cost $14,000. The cash flows are as follows:

a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)

a-2. Which of the two projects should be chosen based on the payback method?
  

• Project A

• Project B

b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

b-2. Which of the two projects should be chosen based on the net present value method?
  

• Project B

• Project A

c. Should a firm normally have more confidence in the payback method or the net present value method?

• Payback method

• Net present value method

8. Dammon Corp. has the following investment opportunities:

Under the payback period and assuming these machines are mutually exclusive, which machine(s) would Dammon Corp. choose?
A. Machine A
B. Machine B

C. Machine C
D. None of the machines will be accepted.

You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000. Rate Maturity Mo/Yr Bid Asked Chg Ask Yld ?? May 20 103.4729 103.5457 +.3132 6.179 5.674 May 25 104.5069 104.6526 +.4401 ?? 6.208 May 35 ?? ?? +.5522 4.211 In the above table, find the Treasury bond that matures in May 2025. What is your yield to maturity if you buy this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Yield to maturity %