2. Which one of the following statements is correct? A. The future value of an annuity is unaffected by the amount of each annuity payment. B. The present value of an annuity is unaffected by the number of the annuity payments. C. The present value of an annuity increases when the interest rate decreases. D. The present value of an annuity increases when the interest rate increases. E. The future value of an annuity increases when the interest rate decreases. 4. A debenture is: A. long-term debt
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you created it from the bank’s perspective? 0 1 2 3 4 5 4000 –1000 –1000 –1000 –1000 –1000 From the bank’s perspective‚ the timeline is the same except all the signs are reversed. 4-3. Calculate the future value of $2000 in a. Five years at an interest rate of 5% per year. b. Ten years at an interest rate of 5% per year. c. Five years at an interest rate of 10% per year. d. Why is the amount of interest earned in part (a) less than half
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| FNCE 10001 | Assignment 1 | | Thomas Hu 586870 | 8/12/2012 | Tutorial: Thursday 1:00pm-2:00pm | Question 1 A risk premium is the difference in value between the expected return on a security and the interest rate on an alternative‚ “risk-free” investment both of the same maturity. An asset’s risk premium is a form of compensation for investors who are willing to take on the uncertainties associated with a risky investment. This is used to attract investors to purchase equity
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90= 3‚000‚000 C = $303‚107.83 2. You have just taken out a mortgage for $575‚000‚ at a fixed rate of 4.75% per year‚ compounded monthly‚ and a term of 30 years. a) Calculate the monthly payments The payments must discount to a value that is equivalent to $575‚000 today‚ assuming a monthly rate of (4.75%/12)‚ or 0.39583% per month‚ for 360 months. C * Annuity discount factor (0.39583%‚360) = 575‚000 C * 191.70 = 575‚000 C = $2‚999.47 b) For the first six months’
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of a put option receives money for the obligation to buy.... 3. The intrinsic value of a call option is Max [S – E‚0]. It is the value of the option at expiration. 4. The value of a put option at expiration is Max[E – S‚0]. By definition‚ the intrinsic value of an option is its value at expiration‚ so Max[E – S‚0] is the intrinsic value of a put option. 5. The call is selling for less than its intrinsic value; an arbitrage opportunity exists. Buy the call for $10‚ exercise the call by paying
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t-years and not periods and kc-discount Rate Relation between EAR and kC:kEAR=ekC-1 ‚ kC=ln(1+kEAR) Present/future Value Additives: Cash flows at a particular time. Invest:NPV>0 Present Value of Annuities: V0=CF1- 11+knk=CF[PVIFAk;n] = Present Value of Perpetuities:V0=CFk 1k=PVIFAk‚n≡Annuity‚ n→∞ Future Values of Annuities:Vn=V0*FVIFk‚n=CF*PVIFAk;n*FVIFk;n=CF*FVIFA(k;n) FVIFAk;n=1+kn-1k Annuities Due: PVIFAduek;n=1-11+knk(1+k)
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How many individuals today consider their core values? What would the response of a teenager be if they were confronted with a question concerning their virtues? A typical teenager would most likely have no idea. It can be argued that the lack of awareness of core values in today’s society is rather frightening‚ just how would individuals cope if they are tested in a time of conflict‚ especially in a civilisation where we encouraged to be selfish‚ greedy and oblivious to our beliefs. It is true that
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Maximization Approach; Time Value of Money and Uncertainty; Agency Problem; Social Responsibility Business Environment‚ Taxes‚ and Financial Environment: Forms of Business Organizations; Financial Instruments; Money Market and Capital Market Instruments; Financial Intermediaries; Financial Risk and Return Concepts in Valuation / Time Value of Money: Present Value vs. Future Value; Simple Interest vs. Compound Interest; Annuities vs. Simple Compounding and Discounting; Future Value of an Ordinary
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assumptions in Exhibit 3.1? 2. What’s is the most relevant valuation model‚ APV or Present Value? 3. How are multi-currency cash flows‚ currency risk and political risk being taken into account in our valuation model? 4. What is the relevant cost of capital for Jersey? For R.T. Nakit? Can they be different? Why? 5. What is the Dinar (Pound) value of the joint venture R.T. Nakit (jersey)? What are the project’s value drivers? 1- The data presented on exhibit 3.7 is‚ indeed following some of the assumptions
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_______________________________ BSAD 180: Managerial Finance Midterm Exam I. Multiple Choices (40%) ( b) 1. The primary goal of financial management is to: a. maximize current dividends per share of the existing stock. b. maximize the current value per share of the existing stock. c. avoid financial distress. d. minimize operational costs and maximize firm efficiency. e. maintain steady growth in both sales and net earnings. ( c ) 2. The interest rate expressed as
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