Solutions to Chapter 4 The Time Value of Money 1. a. b. c. d. $100/(1.08)10 = $46.32 $100/(1.08)20 = $21.45 $100/(1.04)10 = $67.56 $100/(1.04)20 = $45.64 $100 × (1.08)10 = $215.89 $100 × (1.08)20 = $466.10 $100 × (1.04)10 = $148.02 $100 × (1.04)20 = $219.11 2. a. b. c. d. 3. $100 × (1.04)113 = $8,409.45 $100 × (1.08)113 = $598,252.29 4. With simple interest, you earn 4% of $1,000 or $40 each year. There is no interest on interest. After 10 years, you earn total interest of $400
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FIN203 CRISP MARKETS By Wei-Yuan Yang 701818096 Na Zhou 701800436 Jiangan Wu 701773677 Summary We acknowledged that there are some apparent spillover effects for both traditional store and online store. For online store, which is a new business model for Crisp Markets, Crisp Markets needs to consider some aspects like WACC, payment terms & security issue, delivery and customer satisfaction. From the perspective of finance, at first, we calculate the net
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of present value is so important for corporate finance and is often the very first topic taught in any finance class. Present Value is the process of determining what a cash flow to be received in the future is worth in today's dollars. Therefore, the Present Value of a future cash flow represents the amount of money today which, if invested at a particular interest rate, will grow to the amount of the future cash flow at that time in the future. The process of finding present values is called
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CHAPTER 2: TIME VALUE OF MONEY Practice Problems PROBLEM 1 What amount must be deposited today in an account paying 6% per year, compounded monthly in order to have $2000 in the account after 5 years? PROBLEM 2 Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest annually at the rate of 9 percent for seven years. a) How much will Jim have on deposit at the end of seven years? b) Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much
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All CFA Institute members and candidates are required to comply with the Code and Standards Basic structure for enforcing the Code and Standards The CFA Institute Bylaws primary principles Based on two Fair process to member and candidate Confidentiality of proceedings Rules of Procedure Maintains oversight and responsibility The CFA Institute Board of Governors Through the Disciplinary Review Committee (DRC) Is responsible for the enforcement of the Code and Standards Conducts professional
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Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Previous editions published under the Prentice-Hall imprint Twelfth edition published under the Financial Times Prentice Hall imprint 2005 © 2001, 1998 by Prentice-Hall, Inc. © Pearson Education Limited 2005 The rights of James C. Van Horne and John M. Wachowicz JR. to be identified as authors of this work have been asserted by them in accordance with the Copyright
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Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Previous editions published under the Prentice-Hall imprint Twelfth edition published under the Financial Times Prentice Hall imprint 2005 © 2001, 1998 by Prentice-Hall, Inc. © Pearson Education Limited 2005 The rights of James C. Van Horne and John M. Wachowicz JR. to be identified as authors of this work have been asserted by them in accordance with the Copyright
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marketability of the managers. d) market value of the existing owners' equity. e) firm’s current sales. 3. The primary goal of financial management is to: a) maximize current dividends per share of the existing stock. b) maximize the current value per share of the existing stock. c) avoid financial distress. d) minimize operational costs and maximize firm efficiency. e) maintain steady growth in both sales and net earnings. 4. Accounting concepts for a firm to create value it must: a) have a greater cash
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marketability of the managers. d) market value of the existing owners' equity. e) firm’s current sales. 3. The primary goal of financial management is to: a) maximize current dividends per share of the existing stock. b) maximize the current value per share of the existing stock. c) avoid financial distress. d) minimize operational costs and maximize firm efficiency. e) maintain steady growth in both sales and net earnings. 4. Accounting concepts for a firm to create value it must: a) have a greater cash
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CHAPTER 7: ADVANCED OPTION STRATEGIES END-OF-CHAPTER QUESTIONS AND PROBLEMS 1. (Bull Spread) Buy one put with exercise price X1 and sell one put with exercise price X2. The profit equation is ( = Max(0, X1 – ST) – P1 – Max(0, X2 – ST) + P2 If ST < X1 < X2 ( = X1 – ST – P1 – X2 + ST + P2 = X1 – X2 – (P1 – P2) Recall from Chapter 3 that the difference between exercise prices is less than the difference between premiums. Since X1 < X2 and P1 < P2, the above profit
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