You find two investments:

1) a T-BILL with a Face value of 10.000 $ and 120 day until maturity with a current price of 96.5 and

2) 260 days to maturity a price of 92.8 and a Face Value of 10,000 $.

Questions:

Calculate the 4 different money market yields for both instruments.

Which of the two money market instruments will you choose? Justify your decision

Take two of the five functions of insurers and describe and discuss the functions. Rate the five functions in terms of (1) importance, and separately, (2) difficulty. Explain your reasoning.

1. In the B/S model, a decrease in time to expiration will lead to

a. an increase in call value and a decrease in put value

b. a decrease in call value and an increase in put value.

c. an increase in call value and an increase in put value

d. none of the above

2. The Black-Scholes option pricing model allows for continuous movements in the value of the underlying stock.

a. true

b. false

3.

Use the Black-Scholes formula to the value of a call option given the following information:

T= 6 months

standard deviation=25%

Exercise price= 50

Stock price=50

Interest rate= 2%

a. 3.75

b. 2.87

c. 3.11

d. 3.63

4. Use the information in the previous question to find the value of a six month put option on the same stock with an exercise price of 50. Round intermediate steps to four decimals and round your final answer to two decimals. Do not use the dollar sign when entering your response.

A company has net income of $200,000, a profit margin of 7%, and an accounts receivable balance of $120,000. Assuming 100% of sales are on credit, what is the company's days' sales in receivables?

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A company has sales of $50,000, costs of $23,000, depreciation expense of $2,000, and interest expense of $1,500. If the tax rate is 21%, what is the operating cash flow, OCF?

A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply.

Consider the following case:

The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years:

The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?

$917,500

$1,979,094

$1,775,000

$2,292,500

Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments:

Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $750 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $8,000 and never have to pay annual membership dues.

Obviously, the lifetime membership isn’t a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it’s a great deal. Suppose that the appropriate annual interest rate is 7.1%. What is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper (on a present value basis) than paying $750 in annual membership dues? (Note: Round your answer up to the nearest year.)

20 years

16 years

18 years

14 years

In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 6% annual interest rate, what is its value as of 2012 (386 years later)?

$119,589,805,520.24

$161,797,972,174.44

$185,715,933,278.49

$140,693,888,847.34

Summer Tyme plc is considering a new three-year expansion project that requires an initial non-current asset investment of £3.9 million. The non-current asset actually is depreciated straight line to zero over the three years of the project. The project is estimated to generate £2,650,000 in annual sales, with costs of £835,000.Suppose the required return on the project is 13 per cent, the project requires an initial investment in net working capital of £300,000, the tax rate is 27 per cent and the non-current asset actually is depreciated straight-line to zero over the three years of the project. What is the project’s year 1 net cash flow? What is the project’s year 2 net cash flow? What is the project’s year 3 net cash flow? What is the project`s NPV?

( Should we consider net working capital in net cash flow year 3?

A firm has Net Income of $60,800 and has Total Assets of $601,991. The firm’s payout ratio is 60 percent. What is the firm’s Internal Growth rate? Can the firm grow at 4 percent without raising external funds and why? (Hint: Need to first compute ROA).

Group of answer choices

6.45 percent; No, because 4 percent < Internal Growth Rate

6.45 percent; Yes, because 4 percent < Internal Growth Rate

4.21 percent; Yes, because 4 percent < Internal Growth Rate

4.21 percent; No, because 4 percent < Internal Growth Rate

No idea

Upriver Tours has balance sheet values of: Inventory $70,500; accounts receivable $50,700; accounts payable $58,900; cash $32,300, notes payable $20,000, long-term debt $134,700, and net fixed assets $504,500. What is the current ratio? Do you believe the company can meet its short-term obligations?

Group of answer choices

1.95, yes

0.95, no

2.11, yes

1.98, no

0.98, yes

What differentiates an ordinary investment from a security since we are discussing finance? List all the factors. I'm a newbie on your board and struggling what are the differences. Can you help me understand?

Problem 3-29 Market Value Ratios [LO2]

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Calculate the duration of a 3 year from maturity bond that has a 1.50% annual pay coupon rate and a 6.50% yield. (Use 4 decimal point precision.)