Question
In: Finance
formula OR Excel function. For problems 5 & 6 use required nominal annual return: 10.00% 5....
formula OR Excel function.
| For problems 5 & 6 use required nominal annual return: | 10.00% | |||
| 5. Consider the following end-of-year cash flows: | ||||
| Year | Cash flow | |||
| 0 | $0.00 | |||
| 1 | $40.00 | |||
| 2 | $60.00 | |||
| 3 | $60.00 | |||
| Present Value | ||||
| a. What is the present value of these cash flows (in year 0)? | ||||
| b. If the purchase price of this investment is $140 today, would you buy it? Why? | ||||
| (Compare instrinsic value to actual price) | ||||
| c. What is the expected rate of return on this investment if the purchase price is $140? | ||||
| Year | Cash flow | Internal Rate of Return | ||
| 0 | -$140.00 | |||
| 1 | $40.00 | |||
| 2 | $60.00 | |||
| 3 | $60.00 | |||
| d. Would you buy this investment based on your answer to part c. and why? | ||||
| (Compare expected return to required return). | ||||
Solutions
jeff jeffy answered 2 years agoRelated Solutions
For problems 5 & 6 use required nominal annual return: 10.00% 5. Consider the following end-of-year...
For problems 5 & 6 use required nominal annual
return:
10.00%
5. Consider
the following end-of-year cash flows:
Year
Cash flow
0
0
$0.00
1
$40.00
2
$60.00
3
$60.00
Present Value
a. What
is the present value of these cash flows (in year 0)?
$0.00
b. If the
purchase price of this investment is $140 today, would you buy it?
Why?
(Compare instrinsic value to actual price)
c. What is
the expected rate of return on this investment...
using formula OR Excel function. For questions 1 - 4 use a required nominal annual return:...
using formula OR Excel function.
For questions 1 - 4 use a required nominal annual
return:
5.00%
1. Consider
a 1-year CD.
Principal value
$5,000.00
What is the
future value of the CD in 1 year AND what is the effective
annual rate?
Future Value
EFF
a. annual
compounding?
b.
semi-annual compounding?
c.
quarterly compounding?
d. monthly
compounding?
e. daily
compounding?
2. Rework
problem #1 assuming a 5-year CD with $5000 principal.
Future Value
EFF
a. annual
compounding?
b.
semi-annual...
For questions 1 - 4 use a required nominal annual return: I jus finished this homework,...
For questions 1 - 4 use a required nominal annual
return:
I jus finished this homework, and i wanted to know
wheter my answers were correct or no?
5.00%
1. Consider
a 1-year CD.
Principal value
$5,000.00
What is the
future value of the CD in 1 year AND what is the effective
annual rate?
Future Value
EFF
a. annual
compounding?
$5,250.00
5.00%
b.
semi-annual compounding?
$5,253.13
5.06%
c.
quarterly compounding?
$5,254.73
5.09%
d.
monthly compounding?
$5,255.81
5.12%
e. daily...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the problems...
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are required to show the following 3 steps for each problem: (i)
Describe and interpret the assumptions related to the problem. (ii)
Apply the appropriate mathematical model to solve the problem.
(iii) Calculate the correct solution to the problem. Round all
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You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related...
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(Excel) to solve 10 problems related to the cost of capital. You
are required to show the following 3 steps for each problem: (i)
Describe and interpret the assumptions related to the problem. (ii)
Apply the appropriate mathematical model to solve the problem.
(iii) Calculate the correct solution to the problem. Round all
answers to two decimal places
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You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related...
You are required to use a financial calculator or spreadsheet
(Excel) to solve 10 problems related to the risk and return, stocks
and bonds valuation. You are required to show the following 3 steps
for each problem:
(i) Describe and interpret the assumptions related to the
problem.
(ii) Apply the appropriate mathematical model to solve the
problem.
(iii) Calculate the correct solution to the problem.
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PLEASE USE FORMULA AND NOT EXCEL SO I CAN UNDERSTAND HOW TO USE FORMULA THE INITIAL...
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TO USE FORMULA
THE INITIAL QUESTION:
Gerald has taken out a loan of $100,000 today to start a
business. He has agreed to repay the loan on the following
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The repayments for the first 5 years will cover interest only to
help reduce the financial burden for Gerald’s business...
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