Question

a)A project with an initial cost of $58,090 is expected to generate annual cash flows of $15,700 for the next 6 years. What is the project's internal rate of return?

b)Crossfade Corp. has a bond with a par value of $2,000 that sells for $2,086.94. The bond has a coupon rate of 6.72 percent and matures in 20 years. If the bond makes semiannual coupon payments, what is the YTM of the bond?

c)

You expect to receive $3,300 upon your graduation and will invest your windfall at an interest rate of .47 percent compounded quarterly until the account is worth $4,900. How many years do you have to wait until you reach your target account value?

Answer 1

a	Year	Cash Flows
	0	-58090
	1	15700
	2	15700
	3	15700
	4	15700
	5	15700
	6	15700
	IRR	15.84%
		IRR(Values 0 to 6)
b	FV	2000
	PV	2086.94
	PMT	67.2	=2000*6.72%/2
	NPER	40	(20 x 2)
	YTM	6.33%
		=RATE(40,67.2,-2086.94,2000)*2
c	FV = PV x (1+r)^n
	Here,	FV =	4900
		PV =	3300
		r =	.47%/4
		n =	?
		Putting the values in formula, we get
		4900 = 3300 x (1+.0047/4)^n
		1.001175^n =	4900/3300
		1.001175^n =	1.484848485
		Taking ln both sides
		n =	ln(1.484848)/ln(1.001175)
		n =	336.63
	So converting in years = 84.1575