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***Please give an explanation as to how you got the answer and worked through each question/equation including the formula you would use and how you use it and/or enter it on a finance calculator. These are practice questions before a midterm and I am completely lost as to how to solve for the following questions. I really need your help. midterm and final is 50% of my grade so I have to do well and understand what I am doing. Thanks***** _____________________________________________________________ Ch. 5 2. *Present Value and Multiple Cash Flows Q. Investment X offers to pay you $4300 per year for 9 years, whereas Investment Y offers to pay you $6100 per year for 5 years. Which of these cash flow streams has the higher present value if the discount rate is 6 percent? If the discount rate is 22 percent? 3. *Future value and multiple cash flows Havana, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 11 percent? At 24 percent? Year 1 = $910, Year 2 = $1,140, Year 3 = $1,360, Year 4 = $2,100 27. *Discounted cash flow analysis If the appropriate discount rate for the following cash flows is 8.4 percent, what is the present value of the cash flows? Year 1 = $1200, Year 2 = $1,100, Year 3 = $800, Year 4 = $600 28. *Discounted cash flow analysis If the appropriate discount rate for the following cash flows is 9.29 percent per year, what is the present value of the cash flows? Year 1 = $1,900, Year 2 = $2,300, Year 3 = $4,500, Year 4 = $5100 Ch.6 6. Bond prices App Store Co. issed 15- year bonds one year ago at a coupon rate of 6.1 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.3 percent, what is the current bond price? 7. Bond Yields Night Hawk Co. issued 15-year bonds two years ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 108 percent of par value, what is the YTM? 15. Bond price movements Bond X is a premium bond making annual payments. The bond pays an 8 percent coupon, has a YTM of 6 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 6 percent coupon, has a YTM of 8 percent, and also has 13 years to maturity. What are the prices of these bonds today? If the interest rates remain unchanged, what do you expect the prices of these bonds to be in one year? In three years? In eight years? In 12 years? In 13 years? What's going on here? Illustrate your answers by graphing bond prices versus time to maturity. 16. Interest Rate Risk Both Bond Bill and Bond Ted have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

 

Paper#8607 | Written in 18-Jul-2015

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