Question

question2

Assume the total cost of a university education will be $50 000 when your child enters university in 10 years. You presently have $1 000 to invest. What annual rate of interest (%, to 2 decimals) must you earn on your investment to cover the cost of your child’s university education?

Question 3

You expect to receive $40 000 at graduation in four years. You plan on investing it at 5% until you have $100 000. How long (years to 2 decimals) will you wait from now?

Question 4

After carefully going over your budget, you have determined you can afford to pay $2 000 per month towards a new flat. You call up your local bank and find out that the going rate is 1% per month for 480 months. How much can you borrow?

Question 5

As a lender, you want to earn 5% on a particular loan. You want to quote a rate that features Monthly compounding. What rate do you quote? (%, to 2 decimals)

Question 6

You are to make monthly deposits of $400 into a retirement account that earns an APR of 5% compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 31 years?

Question 7

You want to buy a new sports car from Muscle Motors for $50 000. The contract is in the form of a 48-month annuity due (payments are at the beginning of each month) at a 4% APR. What will your monthly payment be?

Question 8

Deddington Teddies Corporation has bonds on the market with 8 years to maturity, a YTM of 4.1% and a current price of $945. The bonds have a face value of $1000 and make half-yearly payments. What must the coupon rate be on Deddington Teddies’ bonds?

Question 9

Bond D is a discount bond with a 4% coupon rate. The bond makes annual payments, have a YTM of 8% and have five years to maturity. What is the current yield for bond D? If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D? Assume a face value of $1 000.

Question 10) A firm is expected to increase dividends by 10% in Year 1 and by 12% in Year 2. After that, dividends will increase at a rate of 5% per year indefinitely.

If the last dividend was $1 and the required return is 21%, what is the price of the share?

Answer #1

Assume the total cost of a university education will be $70,000
when your child enters university in 6 years. You presently have
$40,000 to invest. What annual rate of interest (APR) must you
earn, if the interest is compounded semi-annually? Enter your
answer as a percentage. Do not include the percentage sign in your
answer.

Assume the total cost of a university education will be 290000
when your child enters university in 18 years. You currently have
55000 to invest. what annual rate of interest must you earn on your
investment to cover the cost of your child's university
education?
a) 6.24%
b) 9.68%
c) 8.39%
d) none of the above

Excel retirement problem:
You just got your first job and plan to start saving for
retirement by investing with each monthly paycheck.
You plan to retire in 45 years.
In 50 years, you want to give your daughter a gift of
$1,000,000. You will receive an inheritance from a rich
great-uncle of $250,000 in 20 years.
You think you will want $150,000 every year when you retire,
starting the day you retire. You plan to...

You need a new car. You can either lease or buy the car for 355
000 SEK. In both cases you expect to use the car for 5 years. It
will have a residual value of 120 000 SEK after 5 years. You can
borrow at a rate of 2.5% APR with monthly compounding.
(a) In case you buy the car you will take an annuity loan over 5
year at a borrowing rate of ${col}%. What will be your...

Your daughter just turned 4 years old. You anticipate she will
start University when she turns 18. You would like to have funds in
a registered education savings plan (RESP) to fund her education at
that time. You anticipate she will spend 6 years in university, and
it will cost $20,000 per year. She will need the $20,000 at the
start of each school year. When she graduates (debt free) you would
also like her to have $40,000 for a...

You have finished your time at Kelley and need to start thinking
about retirement. You plan on working for 20 more years and then
retire. Upon your retirement 20 years from today, you plan to have
enough money to withdraw $10,000 per month, with the first payment
coming exactly one month after your retirement day. You expect your
retirement account to earn a return of 8% APR (stated rate),
compounded monthly, on all funds in the retirement account.
Assuming you...

Your firm has taken out a $ 530 000 loan with 8.6 % APR
(compounded monthly) for some commercial property. As is common in
commercial real estate, the loan is a 5-year loan based on a
15-year amortisation. This means that your loan payments will be
calculated as if you will take 15 years to pay off the loan, but
you actually must do so in 5 years. To do this, you will make 59
equal payments based on the...

Staind, Inc., has 11 percent coupon bonds on the market that
have 25 years left to maturity. The bonds make
semiannual payments. If the YTM on these bonds is
5 percent, what is the current bond price? Answer the question with
2 decimals (e.g. 1030.12)

1. You want to be able to withdraw $35,000 each year for 25
years. Your account earns 5% interest.
a) How much do you need in your account at the beginning?
b) How much total money will you pull out of the account?
c) How much of that money is interest?
2. You want to buy a $23,000 car. The company is offering a 2%
interest rate for 48 months (4 years). What will your monthly
payments be?
3. Suppose...

You value education and you want your child to receive the best
possible education. But sending a child to private schools and Ivy
League colleges is not cheap. You want to start saving money so
that when you child need the money, you can support him/her. The
current assumption is you will have your 1st child in 5 years and
you wish to have $200,000 in today’s dollars when he/she is 15
years old. Based on current situation, you expect...

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