must search for a job, he has remained intellectually active. Which term best describes Bob’s activity? a. Moral Hazard b. Screening c. Adverse Selection d. Signaling 3. A three-year bond has 8.0% coupon rate and face value of $1000. If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments. (Chapter 2 & 3) a. $857.96 b. $949.24 c. $1057.54 d. $1000.00
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------------------------------------------------- COURSE: HAME507-01 Sep 17, 2014 Mastering the Time Value of Money ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- SUBJECT: Lump Sum Values ------------------------------------------------- -------------------------------------------------
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FVn = PV*(1+i)^n | PV = FVn / (1+i)^n Present Value of annuity (PVA): the present value of the cash flows from an annuity, discounted at the appropriate discount rate Individual Cash Flow (CFn): Present value of annuity equation: CF/I x [1-1/(1+i)^n] Present Value of Ordinary Annuity: ***PMT x ((1-(1/1+i^n))/i) PVAn = CF x 1-1/(1+i)^n / i PVAn = present value of an n period annuity | CF = level and equally spaced cash flow | I = discount / interest rate | n = number of periods PVAn
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Chapter One: Introduction Introduction: In our country, bank institutions play a vital role for overall economic growth of the country. People save their money by depositing in banks and banks collect their funds which are investing in further investment. Banks collect their funds with various types of deposits. In our study, we discussed about fixed deposit scheme and deposit pension scheme. Here, we see that both types of deposits’ have different interest rate in different banks. When a fixed
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Actuarial Education Company CT1: Assignment X1 Solutions Page 1 Assignment X1 Solutions Markers: This document sets out one approach to solving each of the questions. Please give credit for other valid approaches. Solution X1.1 The present value is: 50a• = 50 = £833.33 i [1] Solution X1.2 The length
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calculate to present value of 3,000,000 in 15 years you first have to multiply it by the possibility, 0.7 giving you 2,100,000. I then used the equation. 2,100,000* 1/(1.1)^15 giving an answer of $502,723.30. After that I calculated the value of the ordinary annuity from year 6-15 by using the equation 200,000*1/(1.1)^6 with the exponent increasing by one for each year. The annuity came to a total of $763,058.55. Once I added up all three payments it comes to a total present value of $2,265,781.85
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3. Time Value of Money II- tutorial questions (tutorial in week 4) | 1. You are in first year at university and are planning a trip to Vietnam when you graduate at the end of 4 years. You plan to save the following amounts annually, starting today: $625, $700, $700 and $750. If the account pays 5.75 per cent annually, how much will you have at the end of 4 years? 2. Stephanie Watson plans to adopt the following investment pattern beginning next year. She will invest $3125 in each of the
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Supplement of Formulae and Present Value Tables Formulae 1. CAPITAL STRUCTURE a) After-Tax Marginal Cost of Debt: kb = k(1− T) or where b) (1− T)I F k = interest rate; T = corporate tax rate; I = annual interest payment on debt; F = face value of debt Cost of Preferred Shares: kp = Dp NPp where c) Dp = stated annual dividend payment on shares; NPp = net proceeds on preferred share issue Cost of Common Equity: i) Cost of Common Shares (Capitalization of Dividends with Constant
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A. increasing payments paid for a definitive period of time B. increasing payments paid forever C. equal payments paid at regular intervals over a stated time period D. equal payments paid at regular intervals of time on an ongoing basis E. unequal payments that occur at set intervals for a limited period of time 2. Which one of the following accurately defines a perpetuity? A. a limited number of equal payments paid in even time increments B. payments of equal amounts that are paid irregularly
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return goes up, the anticipated price goes down. In other words, the ‘better deal’ on the stock (lower price) gets you a higher overall return. Bond: a) The present value of that stream of payments is $785.45. b) When annual interest rate changes to 12.36%, i calculated the semiannual rate (which is 6%) and the present value is re-calculated as $917.59. Beta: a) Beta = (return – riskless rate) / market premium Therefore, Beta = (12% - 5%) / (10%) = 0.7 b) If the stock’s beta was
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