Question

In: Finance

please give me the correct answer with a necessary calculation Charlotte Watson is studying towards a...

please give me the correct answer with a necessary calculation

Charlotte Watson is studying towards a Business BS, Financial Management Specialization degree from Grenoble Ecole de Management (France) and currently working as Market Risk Analyst Intern for Morgan Stanley.

Charlotte is a part of the team that has buyside experience in M&A, IBD, Equity Research and Private Equity.

The team is providing consulting services to Ohio Teachers and the pension plan representatives want to know if their investment is worth for their money. Ohio teachers will pay out $2.2 million based on a contract and receive payments of $0.6 million today, $0.8 million one year from today, and $0.8 million two years from today.

Charlotte wants to advice the representatives of Ohio teachers pension plan and wants to know if this contract worth today if the firm can earn 7.2 percent on its money. How much the contract is worth? Can you help Charlotte?

1. $2,038,616.67

2. $2,042,414.79

3. $2,124,339.07

4. $2,108,001.32

Karen Kelly is studying towards an online BS in Finance degree from MIT: Sloan (US) and currently working as Equity Research Associate Intern for HSBC Holdings PLC.

Karen helps a research team that identifies potential stock-market winners, and appropriately trade such securities while engaging institutional clients on the buy-side by providing industry research reports and analysis for the portfolio managers and analysts.

The team is providing financial planning advice to individuals and Karen is a part of the group.

Currently, Ms. Suzie Walters is visiting and asking for help to figure out a retirement problem. Ms. Walters want to have $250,000 annual income every year for the next 30 years. If she can earn an average rate of return of 6 percent, how much does Ms. Walters need to put down today to have $250,000 annual income every year for the next 30 years? Can you help Karen?

1. $3,246,422.40

2. $3,333,333.30

3. $3,312,886.70

4. $3,441,207.79

Carolyn Taylor is studying towards MBA with a track in finance from University of Chicago: Booth (US) and currently working as Quantitative analyst, Equities Intern for UBS.

Carolyn supports a team that is engaged with hedge funds, asset managers and/or investment banks that support the next-generation machine learning systems for the automation of valuation model building and investment research analytics.

The team is providing consulting services to Teacher Retirement System of Texas.

The representatives of Teacher Retirement System of Texas want to invest some of the money (uneven amounts, and each year for the next 4 years at the end of periods: Year 1: $20 million, Year 2: $24 million, Year 3: $28 million, and Year 4: $32 million) earning at 5.5 percent interest. How much will be the total amount at the end of year 4? Can you help Carolyn to find the approximate answer.

1. $108,392,690

2. $111,737,430

3. $107,525,400

4. $110,414,140

Solutions

Expert Solution

1. Charlotte Question

Present Worth of Receipts = $600000 / (1 + r)^n + $800000 / (1 + r)^n + $800000 / (1 + r)^n

r = Interest Rate

n = Time

Present Worth of Receipts = $600000 / (1 + 0.072)^0 + $800000 / (1 + 0.072)^1 + $800000 / (1 + 0.072)^2

Present Worth of Receipts = $600000 + $800000 * 0.932836 + $800000 * 0.870183

Present Worth of Receipts = $2042414.79 Option 2

2. Karen Kelly

Present Value of Annuity receipts = Annuity * (1 - (1 + r)^-n) / r

Present Value of Annuity receipts = 250000 * (1 - (1 + 0.06)^-30) / 0.06

Present Value of Annuity receipts = 250000 * (1 - 0.17411) / 0.06

Present Value of Annuity receipts = $3441207.79 Option 4

Carolyn Taylor Question

Future Worth of Present investment = Year 1 Investment * (1 + r)^n + Year 2 Investment * (1 + r)^n + Year 3 Investment * (1 + r)^n + Year 4 Investment * (1 + r)^n

Future Worth of Present investment = 20 Million * (1 + 0.055)^3 + 24 Million * (1 + 0.055)^2 + 28 Million * (1 + 0.055)^1 + 32 Million * (1 + 0.055)^0

Future Worth of Present investment = $111737430 Option 2


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