WEEK 4 ASSIGNMENT

WEEK FOUR ASSIGNMENT

, you will submit your written answers to questions and calculated answers to problems on an Excel

spreadsheet using formulas for your calculations. I will be downloading the spreadsheet

to review the formulas in the cells of your answers. Please complete the following problems from your

textbook:

Chapter 5

Problem 5-3

Problem 5-5

Problem 5-7

Problem 5-10

Problem 5-23

Questions

5-3 if a firm’s earnings per share grew from $1 to $2 over a 10-year period, the

total growth would be 100%, but the annual growth rate would be less than 10%.

True or false? Explain. (Hint: If you aren’t sure, plug in some numbers and check it

out.)

5-5 To find the present value of an uneven series of cash flows, you must find the

PVs of the individual cash flows and then sum them. Annuity procedures can

never be of use, even when some of the cash flows constitute an annuity, because

the entire series is not an annuity. True or false? Explain

5-7 Banks and other lenders are required to disclose a rate called the APR. What is

this rate? Why did Congress require that it be disclosed? Is it the same as the

effective annual rate? If you were comparing the costs of loans from different

lenders, could you use their APRs to determine the loan with the lowest effective

interest rate? Explain.

5-10 PRESENT AND FUTURE VALUES FOR DIFFERENT INTEREST RATES Find

the following values. Compounding/discounting occurs annually.

a. An initial $200 compounded for 10 years at 4% b. An initial $200 compounded

for 10 years at 8% c. The present value of $200 due in 10 years at 4% d. The

present value of $1,870 due in 10 years at 8% and at 4% e. Define present

value and illustrate it using a time line with data from part d. How are

present values affected by interest rates?

5-23 FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find the amount

to which $500 will grow under each of these conditions:

a. 12% compounded annually for 5 years b. 12% compounded semiannually for 5

years