Suppose there are only 2 investment alternatives: a bank deposit that pays 4% per year and a 2-year coupon bond with 5% annual coupon rate and face value of $1,000. Assume the bank deposit and coupon bond are perfect substitutes. a) What is the market price of the bond at beginning of year 1? And year 2? b) Assume now that at the beginning of year 2, the deposit interest rate unexpectedly increases to 6% annual. What is the market price of the bond at the beginning of year 2? What is the yearly return on the bond in each year?

Machine X has a first cost of $70,000 and an operating cost of $21,000 in year 1, increasing by $500 per year through year 5 with a salvage value of $13,000. Machine Y has a first cost of $62,000 and an operating cost of $21,000 in year 1, increasing by 3% per year through year 10 with a salvage value of $2000. If the interest rate is i =18% per year, evaluate which machine must you choose on the basis of:( with the steps)

(a) the present worth analysis,

(b) the conventional B/C analysis

Harry has just opened a Registered Retirement Savings Plan (RRSP) with his bank and is wondering, which of the following statements is correct with respect to RRSP contributions?

a.Contributions made during the current year and within 30 days of the end of the current year, must be deducted in the current year.

b. There is no penalty for making contributions that are in excess of available deduction room.

c. Contributions made during the current year can be deducted in any subsequent year.

d. Contributions in excess of available deduction room cannot be deducted in the current year or in any subsequent year.

One year ago, the Tyler Rose closed-end fund had a NAV of $35.19 and was selling at an 11% discount. Today, the fund has a NAV of $36.42 and is selling at a 7.5% premium. During the year, the fund paid a dividend distribution of $.48 and a capital gain distribution of $.97.

A. Calculate the NAV-based HPR for the fund for the year.

B. Calculate the market-based HPR for the fund for the year.

C. Recalculate the market-based HPR for the fund for the year, assuming the fund was selling at an 8.8% premium at the beginning of the year and an 11.3% discount at the end of the year.

Find the future values of these ordinary annuities. Compounding occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$900 per year for 10 years at 8%. $

$450 per year for 5 years at 4%. $

$1,000 per year for 5 years at 0%. $

Rework parts a, b, and c assuming they are annuities due.

Future value of $900 per year for 10 years at 8%: $

Future value of $450 per year for 5 years at 4%: $

Future value of $1,000 per year for 5 years at 0%: $

A construction company plans to invest in new equipment to improve their productivity. The planned investment is $500,000 now and $100,000 in year 1.   The gross income for year 1 is $175,000, year 2 is $300,000, and year 3 is $600,000. Taxes related to the investment are $50,000 in year 1, $75,000 in year 2 and $100,000 in year 3.

Determine:

1. The before tax rate of return for the investment
2. The after-tax rate of return for the investment
3. How does the after-tax rate of return compare to the company’s MARR of 15%?

SHOW WORK AND DONT USE EXCEL

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$200 per year for 10 years at 10%. $ ___?

$100 per year for 5 years at 5%. $ ___?

$600 per year for 5 years at 0%. $ ___?

Rework previous parts assuming they are annuities due.

Present value of $200 per year for 10 years at 10%: $ ____?

Present value of $100 per year for 5 years at 5%: $ ____?

Present value of $600 per year for 5 years at 0%: $____?

Find the future values of these ordinary annuities. Compounding occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$1,000 per year for 10 years at 8%. ____?

$ $500 per year for 5 years at 4%. ____?

$600 per year for 5 years at 0%. ____?

Rework parts a, b, and c assuming they are annuities due.

Future value of $1,000 per year for 10 years at 8%: ____?

Future value of $500 per year for 5 years at 4%: ____?

Future value of $600 per year for 5 years at 0%: ____?