1. First National Bank charges 11.18 % compounded monthly on its business loans. First United Bank charges...
Question:
1. First National Bank charges 11.18 % compounded monthly on its business loans. First United Bank charges 11.88%, compounded semiannually.
Calculate the EAR for First United Bank.
2. You are planning to save for retirement over the next 34 years. you will invest $633 per month in a stock account and $165 per month in a separate bond account. The return of the stock account is expected to be 12%, and the bond account will pay 6%. When you retire, you will combine your money into an account with an expected 9% return.
How much can you withdraw each month in retirement from your account assuming a 20-year withdrawal period?
3. The price of Ervin Corp. stock will either be $64 or $87 at the end of the year. Call options are available with one year until expiration. Continuously compounded T-bills currently yield 5.11 %. Suppose the current price of Ervin stock is $73.
What is the value of the call option if the strike price is $75 per share?
4. The price of Ervin Corp. stock will either be $69 or $86 at the end of the year. Call options are available with one year until expiration. Continuously compounded T-bills currently yield 5.59 %. Suppose the current price of Ervin stock is $78.
What is the value of the call if the strike price is $55 per share?
5. You wrote 3 call option contracts on XYZ stock with a strike price of $40 and an option premium of $1.56.
What is your net gain or loss on this investment if the price of XYZ is $36.63 on the option expiration date?
6. One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $816 per month. You will charge 1.37 % per month interest on the overdue balance.
If the current balance is $10,014, how many years will it take for the account to be paid off?
Please provide the exact calculation as well. How you solved the problem.
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe