Question 1:

The formula number answer for each question

B D E F G H K M N P Q R S T U v w X Y Z AA AB AC AD AE AF 180 181 11b. Compounded monthly? 182 183 N 36 184 I 0.42% 185 PV $10 186 PMT SO FV = 187 188 12a. What's the present value of $100 due in 3 years if the appropriate interest rate is 6%, compounded annually? 189 190 N 3 191 6% 192 PMT SO 193 FV $100 PV = 194 195 12b. Compounded monthly? 196 197 N 36 198 0.5% 199 PMT 200 FV $100 PV = 201 202 203 13. A bond that matures in 10 years has a par value of $1,000, an annual coupon payment of $60; its market interest rate is 9%. What is its price? 204 205 Years to maturity 10 206 Annual payment $60 207 Par value $1,000 208 Going rate, Id 9% 209 = 210 Value of bond = 211 212 14. A bond that matures in 12 years has a par value of $1,000 and an annual coupon of 12%; the market interest rate is 8%. What is its price? 213 214 Years to maturity 12 215 Coupon rate 12% 216 Annual payment $120 217 Par value $1,000 210 fx Enter text or formula here CL . . .Z AD M R S T U v w X Y AC AE AF AA AB N P Q B D 152 9b. How would your answer change if you made withdrawals at the beginning of each year? 153 154 N 10 155 5% 156 PV $1,000,000 157 EV SO PMT = 158 10a. If you had $100,000 that was invested at 8% and you wanted to withdraw $10,000 at the end of each year, how long would your funds last? 159 160 161 8.0% 162 PV $100,000 163 PMT -$10,000 164 FV N = 165 166 10b. How long would they last if you earned 0%? 167 168 0.0% 169 PV $100,000 170 PMT -$10,000 171 FV $0 NE 172 173 174 11a. What's the future value of $100 after 3 years if the appropriate interest rate is 5%, compounded annually? 175 176 N 177 5% 178 PV $100 179 PMT SO FV 180 181 11b. Compounded monthly? 182 183 N 36 184 0.42% 185 PV $10 186 PMT SO FV = 187 188 12a. What's the present value of $100 due in 3 years if the appropriate interest rate is 6%, compounded annually? jon fx Enter text or formula here . . . CLAE S T U v w X Y Z AA AB AC AD AF M B D 20 27 3a. Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest rate on 3-year government bonds is 4%, how much is the bond worth today? 28 29 N 3 30 4% 31 PMT SO 32 FV $3,000 PV = 33 34 3b. How would your answer change if the bond matured in 5 rather than 3 years? 35 36 N 5 37 4% 38 PMT SO 39 FV $3,000 PV 40 41 3c. What if the interest rate on the 5-year bond was 6% rather than 4%? 42 43 N 5 44 6% 45 PMT SO 46 FV $3,000 PV = 47 48 4a. How much would $1,000,000 due in 100 years be worth today if the discount rate was 3%? 49 50 N 10 3% PMT SO EV $1,000,000 PV = 4b. If the discount rate was 20%? 56 57 N 100 58 20% PMT SO FV $1,000,000 PV = 5a. The U.S. Treasury offers to sell you a bond for $600. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond for $585.43? fx Enter text or formula here . . . CLB D E F G H M N Q R S U V w X Z AA AB AC AD AE AF 4b. If the discount rate was 20%? N 100 20% PMT SO 60 FV $1,000,000 PV = 61 62 63 5a. The U.S. Treasury offers to sell you a bond for $600. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond for $585.43? 64 65 N 10 66 PMT SO 67 PV $600.00 68 EV $1,000 69 70 5b. What rate would you earn if you could buy the bond for $550? 71 72 N 10 73 PMT SO 74 PV $550.00 75 FV $1,000 76 77 5c. For $900? 78 79 N 10 80 PMT SO 81 PV $900.00 82 EV $1,000 1 = 83 84 6a. Roberts Corporation earned $0.70 per share in 1999. Ten years later, in 2009, it earned $1.62. What was the growth rate in Roberts Corporation's earnings per share (EPS) over the 10-year period? 85 86 N 10 87 PMT 88 PV $0.70 89 EV $1.62 90 6b. If EPS in 2009 had been $1.00 rather than $1.62, what would the growth rate have been? fx Enter text or formula here CL . . .B D K 52 L M Year N o P Q R S T U v 53 w X Y Z CFs $150 AA AB AC AD AE AF $200 AG AH Al AK 54 AL AM AN 55 MPV 56 57 58 59 4. An investment costs $350 and is expected to produce cash flows of $100 at the end of each of the next 4 years, then an extra lump sum payment of $300 at the end of the 4th year. 60 What is the expected rate of return on this investment (Internal Rate of Return)? 61 62 Year 63 0 2 3 4 Ann Pmt -$350 64 $100 $100 Lump Sum $100 $100 65 $300 Total CFs -$350 66 $100 $100 $100 $400 67 IBB 68 69 70 5. An investment costs $500 and is expected to produce cash flows of $100 at the end Year 1, $200 at the end or Year 2, and $400 at the end of Year 3. What is the expected rate of return on this investment? 71 Year 72 CFs -$500 73 $200 $400 74 75 76 77 78 6. An investment costs $500 and is expected to produce cash flows of $200 at the end of each of the next 6 years, then an extra lump sum payment of $300 at the end of the 6th year. 79 What is the expected rate of return on this investment (Internal Rate of Return)? 80 81 Year 82 0 Ann Pmt -$500 $200 $200 $200 83 Lump Sum $200 $200 $200 84 Total CFs $300 -$500 $200 $200 85 $200 $200 $200 $500 86 IRR 87 88 89 7. An investment costs $600 and is expected to produce cash flows of $50 at the end Year 1, $200 at the end or Year 2, and $450 at the end of Year 3. 90 What is the expected rate of return on this investment? Year 91 CFs 92 $600 $200 $450 93 IRR 94 95 96 97 98 99 100 101 102 fx 350 TVM Basics Intermediate TVM +C D M o P Q R S T U v w x 2 AA AB AC AD AE AF Intermediate Time-Value of Money Problems AG AH Al AK AL AM AN Total Number of Questions: 12 1a. What's the present value of a 5-year ordinary annuity of $200 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? Interest rate 6% Year 10 Ann Pmt SO $200 $200 Lump Sum $200 $200 $200 Total CFs $1,000 13 $200 $200 $200 $200 $1,200 14 15 16 17 1b. What is the PV if the $100 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? 18 Interest rate 6% 19 20 Year 21 1 3 4 Ann Pmt SO 5 6 7 $100 $100 8 $100 9 10 22 $100 $100 $100 $100 $100 $100 $100 23 Lump Sum Total CFs 24 $0 $100 $100 $100 $1,000 $100 $100 $100 $100 $100 $1,100 25 NPV 26 27 28 2a. What's the present value of a 5-year ordinary annuity of $350 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? 29 Interest rate 30 6% 31 Year 32 0 1 2 3 33 Ann Pmt SO $350 $ $350 $350 34 Lump Sum $350 35 Total CFs $0 $350 $350 $1.000 $350 $350 $1,350 36 NPV 38 2b. What is the PV if the $350 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? 40 Interest rate 6% Year Ann Pmt So Lump Sum $350 $350 $350 $350 $350 $350 $350 $350 $35L 10 $350 $1,00 fx 350 TVM Basics Intermediate TVM +. . . Week 6_FIN 304 TVM Homework V w Y AB AC AE AF S U X Z AA AD B D E F G H K A 120 121 8b. What would the PV be if the interest rate was 4%? 122 123 12 124 4% 125 PMT $200 126 FV SO PV = 127 128 Bc. What if the interest rate was 0%? 129 130 N 12 131 0% 132 PMT $200 133 FV SO PV = 134 135 8d. How would the PV values differ if we were dealing with annuities due? 136 137 Part a Part b Part c 138 N 12 N 12 N 12 10% 4% 0% 139 $200 140 PMT $200 PMT $200 PMT 141 FV so FV $0 FV $0 PV $1.499.01 PV = PV 142 143 144 145 9a. Suppose you inherited $1,000,000 and invested it at 5% per year. What is the most you could withdraw at the end of each of the next 10 years and have a zero balance at Year 10? 146 147 N 10 148 I 5% 149 V $1,000,000 150 EV SO PMT = 151 152 9b. How would your answer change if you made withdrawals at the beginning of each year? fx Enter text or formula here . . . CLBasic Time-Value of Money Problems N Total Number of Questions: 31 1a. What would the future value of $500 be after 5 years at 10% compound interest? a U N 10% PV $500 10 PMT SO FV = 11 12 1b. At 10% simple interest? 13 14 N Annual interest $50.00 15 10% Total interest = 5*10 but use cells in the forumula 16 PV $500 17 PMT SO FV = 18 19 2. Suppose you currently have $3,000 and plan to purchase a 3-year certificate of deposit (CD) that pays 2% interest compounded annually. How much will you have when the CD matures? 20 21 N 22 I 2% 23 PV $3,000 24 PMT SO FV = 25 26 27 3a. Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest rate on 3-year government bonds is 4%, how much is the bond worth today? 28 29 N 3 PMT SO FV $3,000 PV = fx Enter text or formula here . . . CIB C D E F G H K M N O P Q R S T U V W X A world mat matures in 14 years has a pal value of p 1,vou anu an ammaard 213 214 Years to maturity 12 215 Coupon rate 12% 216 Annual payment $120 217 Par value $1,000 218 Going rate, I'd 8% 219 220 Value of bond = 221 222 223 15. Halley Enterprises' bonds currently sell for $950. They have a 7-year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity? 224 Hint: Find using the RATE function 225 Years to maturity 7 226 Annual payment $85.00 227 Current price -$950.00 228 Par value = FV $1.000.00 229 YTM = Required rate, I'd: 230 231 232 16. Last year a firm issued 22-year, 9% annual coupon bonds at a par value of $1,000. Suppose that one year later the going rate drops to 6%. 233 What is the new price of the bonds assuming that they now have 19 years to maturity? 234 235 Years to maturity 21 236 Coupon rate 9% 237 Annual payment $90 238 Par value $1,000 239 Required rate, I'd 6% 240 241 Value of bond = 242 Sum: 4210305.801 Average: 30958.13089 Count: 344 Numerical Count: 136 Maximum: 100B C D E F G K M N P Q R S U V W X Y Z AA AB AC AD AE AF 84 6a. Roberts Corporation earned $0.70 per share in 1999. Ten years later, in 2009, it earned $1.62. What was the growth rate in Roberts Corporation's earnings per share (EPS) over the 10-year period? 85 86 N 10 87 PMT SO 88 PV $0.70 89 EV $1.62 90 91 6b. If EPS in 2009 had been $1.00 rather than $1.62, what would the growth rate have been? 92 93 N 10 94 PMT 95 PV $0.70 96 EV $1.00 97 98 99 7a. How long would it take $1,000 to triple if it were invested in a bank that pays 6% per year? (Hint: For these type of problems use the "NPER" Function) 100 101 6%% 102 PMT SO 103 PV $1,000 104 FV $3,000 N= 105 106 7b. How long would it take if the rate was 10%? 107 108 10% 109 PMT SO 110 PV $1,000 111 EV $3,000 N= 112 113 114 8a. What is the PV of an ordinary annuity with 12 payments of $200 if the appropriate interest rate is 10%? 115 116 N 12 117 10% 118 PMT -$200 119 EV $0 PV = 120 121 8b. What would the PV be if the interest rate was 4%? fx Enter text or formula here CL . . .D G H M N o P Q R S T U v w X Y Z AA AB AC AD AE AF AG AH Al AK AL AM NPY AN 2a. What's the present value of a 5-year ordinary annuity of $350 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? Interest rate 6% Year 0 1 2 4 5 Ann Pmt $0 $350 $350 $350 Lump Sum $350 $350 $1,000 Total CFs $0 $350 $350 $350 $350 $1,350 NPV 2b. What is the PV if the $350 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? Interest rate 6% Year 0 5 6 Ann Pmt $0 $350 $350 $350 9 10 Lump Sum $350 $350 $350 $350 $350 $35L $350 Total CFs $1.00 $0 $350 $350 $350 $350 $350 $350 $350 $ $350 $350 $1,350 48 NPY 3. What's the present value of the following uneven cash flow stream: $0 at Time 0, $150 in Year 1 (or at Time 1), $200 in Year 2, $0 in Year 3, and $500 in Year 4 if the interest rate is 8%? Interest rate 8% Year CFs $150 $200 $500 NPV 4. An investment costs $350 and is expected to produce cash flows of $100 at the end of each of the next 4 years, then an extra lump sum payment of $300 at the end of the 4th year. What is the expected rate of return on this investment (Internal Rate of Return)? Year 0 1 2 Ann Pmt -$350 $100 $100 $100 Lump Sum $100 $300 Total CFs -$350 $100 $100 $100 $400 67 IBR 68 69 70 5. An investment costs $500 and is expected to produce cash flows of $100 at the end Year 1, $200 at the end or Year 2, and $400 at the end of Year 3. What is the expected rate of return on this investment? 71 72 Year CFs -$500 $200 $400 fx 350 TVM Basics Intermediate TVM +