UNIT 2: TEXTBOOK PROBLEMS CHAPTER 4: PROBLEM 2 (a thru c) A. B. C. Present Value 3,200 3,200 3,200 Interest Rate 6% 8% 6% Number of Years 10 10 20 Future Value = $5,731 $6,909 $10,263 CHAPTER 4: PROBLEM 3 A. B. C. D. Future Value = 15,451 51,557 886,073 550,164 Interest Rate 7% 9% 14% 16% Number of Years 12 8 19 24 Present Value = $6,860 $25,875 $73,498 $15,614 CHAPTER 4: PROBLEM 4 A. B. C. D. Present Value = 217 432 41,000 54,382 Future Value 307 896 162,181 483,500 Number of Years 3 10 13 26 Interest Rate 12.26% 7.57% 11.16% 8.77% CHAPTER 4: PROBLEM 5 A. B. C. D. Present Value = 625 810 18,400 21,500 Future Value 1,284 4,341 402,662 173,439 Interest Rate 9% 11% 7% 10% Number of Years (or Periods) 6.00 5.00 3.00 3.00 CHAPTER 4: PROBLEM 11 Discount Rate 5% 13% 18% Year 1: $960 $960 $960 Year 2: $840 $840 $840 Year 3: $1,935 $1,935 $1,935 Year 4: $1,350 $1,350 $1,350 Present Value @ 5%, 13%, and 18% = $22,222,220 $3,676 $3,291 (Note: Use the built-in NPV formula in Excel) CHAPTER 5: PROBLEM 2 A. Settlement (Think of Settlement as the beginning of the duration of the bond) Maturity 1/1/25 (Think of Maturity as the end of the duration of the bond) Rate 0.07 (Coupon Rate) YTM (Yield to Maturity or Required Rate of Return) Redemption 100 (Bonds Face Value, Par Value, or Fair Price; Note that is $100, not $1,000. You make the adjustments by multiplying the answer by 10) Frequency 2 (Coupon payments are semiannual, so you put in a 2. If they are annual, then you input a 1) Basis (Always leave it blank) Bond Price (The answer. But you need to multiply it by 10 to get the actual bond price) Multiply by 10 (Microsoft gives the bond price in 2 digits. You need to multiply it by 10 to get the actual bond price) CHAPTER 5: PROBLEM 3 Settlement 1/2/00 (Think of Settlement as the beginning of the duration of the bond) Maturity 1/1/15 (Think of Maturity as the end of the duration of the bond) Rate 6.8 (Coupon Rate) Pr (The bonds price per $100 face value) Redemption 105 (Bonds Face Value, Par Value, or Fair Price; Note that is $100, not $1,000) Frequency 2 (Coupon payments are semiannual, so you put in a 2. If they are annual, then you input a 1) Basis: (Always leave it blank) YTM CHAPTER 6: PROBLEM 2 Dividend Payment $1.99 Dividend Growth Rate 4.50% ZYX Stock Price $31 Required Return = CHAPTER 6: PROBLEM 4 Dividend $2.65 Dividend increase per year 4.75% Required Return (Return on Investment) 11% Stock Price =