UNIT 2 TEXTBOOK PROBLEMS

A.

B.

C.

Present Value

3,200

3,200

3,200

Interest Rate

6%

8%

6%

Number of Years

10

10

20

Future Value =

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 =

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

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)

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% =

(Note: Use the built-in NPV formula in Excel.)

A.

Settlement

(Think of Settlement as the beginning of the duration of the bond.)

Maturity

(Think of Maturity as the end of the duration of the bond.)

Rate

(Coupon Rate)

YTM

(Yield to Maturity or Required Rate of Return)

Redemption

(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

(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.)

Dividend Payment

$1.99

Dividend Growth Rate

4.50%

ZYX Stock Price

$31

Required Return =

Dividend

$2.65

Dividend increase per year

4.75%

Required Return (Return on Investment)

11%

Stock Price =