Week 4 Checkpoint March 17‚ 2013 XACC/290 Resource: Ch. 4 of Financial Accounting Complete Exercise BE4-1. Complete Problems 4-2A & 4-3A. BE4-1: |Cash |Net Income | |-$100 |$0 | |-$20 |$0 | |+$1‚300 |$1‚300 | |+$800 |$800 | |-$2‚500 |$0 | |-$600 |$0 | | |
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or $24‚000 at the end of eight years. Assuming you could earn 11 percent annually‚ which alternative should you choose? If you could earn 12 percent annually‚ would you still choose the same alternative? Answer: I found two answers for the same problems. One is bringing the present value to the future and the other is bringing the future value to the present. In each one of them‚ different solutions were proposed. A. Present Value to the future Option 1: $10‚000 now with 11% interest. $10‚000
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PROBLEM SET 5: INTEREST RATES‚ AMORTIZING LOANS‚ BOND VALUATION‚ STOCK VALUATION 1. A typical credit card agreement quotes an interest rate of 18 percent APR. Monthly payments are required. What is the actual interest rate you pay on such a credit card? 2. After carefully going over your budget‚ you have determined you can afford to pay €632 per month toward a new sports car. You call up your local bank and find out that the going rate is 1 percent per month for 48 months. How much you can borrow
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shipment‚ five chips are chosen at random. What is the probability that none of them is defective? What is the probability that at least one is defective? 2. An automated manufacturing process produces a component with an average width of 7.55 centimeters‚ with a standard deviation of 0.02 centimeter. All components deviating by more than 0.05 centimeter from the mean must be rejected. What percentage of parts must be rejected? Assume a normal distribution. 3. Assume that the number of cases sold per
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Quinnipiac University School of Business FIN350 Global Financial Markets & Institutions Questions & Problems Set 5 Spring 2013 1. Explain why commercial banks are regulated and describe the major pieces of legislation enacted to prevent bank failures. Financial institutions are regulated because they provide products and services that the economy needs to function efficiently. Also they function in an environment where there is a great deal of asymmetric information‚ so they
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Problem Sets Chapter 5 A1. (Bond valuation) A $1‚000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond’s coupon rate is 7.4%. What is the fair value of this bond? Calculating PV factor: i= required return = 9% = 0.09 n= 10 years Using Cash Flow of $1000 to calculate present value‚ Cash flow= $1000 PV factor = 1/(1+i)^n = 0.42241 PV = $1000*0.42241= 422.41 Using Coupon Rate to calculate present value of Annuity Cash flow= $1000 * 7.4/100 =
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Marketing by Numbers Exercise Set One 1.1 Sanborn‚ a manufacturer of electric roof vents‚ realizes a cost of $55 for every unit it produces. Its total fixed costs equal $2 million. If the company manufactures 500‚000 units compute the following: a) unit cost unit cost = variable cost + fixed cost/unit sales x = $55 + $2‚000‚000/500‚000 = $59 unit cost b) markup price if the company desires a 10% return on sales unit cost/(1 – desired return on sales) $59/(1 - .10) = $65.56 c)
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ended 30 September 2008 $’000 98‚000 (72‚000) ––––––– 26‚000 (3‚000) (7‚600) (500) ––––––– 14‚900 (5‚400) ––––––– 9‚500 ––––––– Revenue (85‚000 + (42‚000 x 6/12) – 8‚000 intra-group sales) Cost of sales (w (i)) Gross profit Distribution costs (2‚000 + (2‚000 x 6/12)) Administrative expenses (6‚000 + (3‚200 x 6/12)) Finance costs (300 + (400 x 6/12)) Profit before tax Income tax expense (4‚700 + (1‚400 x 6/12)) Profit for the year Attributable to: Equity holders of the parent
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Rodriguez operates a variety store that provides an annual revenue of $480 000. Each year‚ he pays $25 000 in rent for the store‚ $15 000 in business taxes‚ and $350 000 on products to sell. He estimates he could put the $80 000 he has invested in the store into his friend’s restaurant business instead and earn an annual 20 percent profit on his funds. He also estimates that he and his family could earn a total annual wage of $90 000 if they worked somewhere other than the store. a. Calculate
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annually with a coupon rate of 8%. The bonds have a par value of $1‚000. The yield to maturity is 9%. What is the current market piece of these bonds? The bonds will mature in 5 years. P= CPN x (1/y) {1-[1/(1+y)^n] + [FV/ (1+y)^n] CPN= 1000 x .08= 80 P= 80 (1/.09) {1- [1/(1.09)^5]} + [1000/(1.09)^5] = 73.39 (.351) + 649.35 = $675.11 Bonds-2. A certain bond has 12 years left to maturity. Interest is paid annually at a coupon rate of 10%. The bonds are currently selling for $850. What is their YTM? 850=
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