Practice for 2\"d Exam XYou lend a friend $35,000. He will repay you in 5 equal

Question

Practice for 2"d Exam XYou lend a friend $35,000. He will repay you in 5 equal annual end of year payments of $10,000. The first payment will occur 1 year from now. What compounded rate of return do you receive? 3.30 What is the present value of a S200 perpetuity discounted back to the present at 8 percent? 2. How much would $20,000 grow to in 4 years if it can earn 6% annual interest with quarterly compounding? 3, What is the Effective Annual Rate (EAR) of an account if you can earn 996 nominal interest with monthly compounding? 5. Ifyou place $350 per month in an investment account andbelieve that you will earn 9% on your investments over the next 20 years, how much will you have set aside when you retire in 20 years' time? You should compound the investment monthly You are trying to buy a $125,000 home when interest rates are 4.2% with monthly compounding. You are financing the home over 20 years and have $12,500 set aside for a down payment. What are your expected monthly payments? 6. X Mid South Semis issued a 10 year bond four years ago that offers a 9% coupon with semiannual interest payments. The bond pays $1,000 on the maturity date. The firm's required rate ofreturn is 7.5%. What should each bond be selling for today? What will each bond sell for on maturity date? Elephant Tours has a bond outstanding with 5 years until maturity. The $1,000 par value bonds offer a coupon rate of 8%, and the current price is S950. What is the bond's yield to maturity? Now assume that the Elephant Tours bonds can be called in 2 years' time with a premium of4%. The coupon rate and current price remain the same as in #8, what is the bond's yield to call? A zero coupon bond with a $1,000 par value has 8 years until maturity. Based on a 5% yield, what is the value of the zero coupon bonds? 11. You are offered $1,000 today, $10,000 in 12 years, or $20,000 in 25 years. Assuming you can earn 12% on your money, which should you choose?

Explanation / Answer

1.

use financial calculator

PV=-35000 is the amount of loan

FV=0 is the amount as all loan is paid back

PMT=10000 is annual installment

N=5 is number of payments

Click CPT

Click 1/Y=13.20% is the answer

2.

Present value=200/8%=2500 is answer

3.

future value in 4 years=20000*(1+(6%/4))^(4*4)=25379.71 is the answer

4.

EAR=(1+(9%/12))^12-1=9.38% is the answer

the above are answers

we do only first 4 questions based on Chegg rule.

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