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Annuity consideration
Your younger sister, Linda, will start college in five years. She has just informed your parents that she wants to go to Hampton University, which will cost $49,000 per year for four years (cost assumed to come at the end of each year). Anticipating Linda’s ambitions, your parents started investing $6,900 per year five years ago and will continue to do so for five more years. Use 11 percent as the appropriate interest rate throughout this problem (for discounting or compounding).
How much will your parents have to save each year for the next five years in addition to the $6,900 they are currently saving to have the necessary funds for Linda's education? Use Appendix C and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
A general partnership must have at least 2 members with each having their potential financial loss in the partnership limited to their individual investment. The owner of a sole proprietorship has unlimited liability for the company’s debt. A corpora..
A Treasury STRIPS matures in 9 years and has a yield to maturity of 4.9 percent. Assume the par value is $100,000. What is the price of the STRIPS? What is the quoted price?
What is the difference between the maintenance margin and the intial margin? Does the trader ever have to worry about intial margin after the intial date of the contract? Explain.
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.89 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt–equity ratio..
Your down-payment is 10 percent of the purchase price. calculate your monthly mortgage payment (of principal and interest).
An investment has an installed cost of $54972. The cash flows over the four-year life of the investment are projected to be $18202, $20327, $18949, and $13403. At what discount rate is the NPV just equal to zero?
A STRIPS has a $9,000 par value and a market value of $7,050. The time to maturity is 5 years. What is the yield to maturity? What is the present value of your windfall if the appropriate discount rate is 10 percent?
An investment costs dollar 1000 up front, but won't start paying off until three years from now, at which time it will return dollar 150 per year for a period.
Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues.
Ace Industries has current assets equal to $8 million. What is the firm's level of current liabilities?
The Pennsylvania state insurance commissioner is concerned that the state's workers compensation insurance market is not competitive.
Assume that there will be a 2% (200 basis points) increase in the market interst rate one year from today. Calculate what the price, current yield and the yield to maturity for the bond one year from today following the rate increase.
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