Reference no: EM132931089

Questions -

Q1. Home heating oil is sold by the gallon. Last winter, the Romano family used 370 gallons of oil at a price of $3.91 per gallon. If the price increases 9% next year, what will their approximate heating expense be? Round to the nearest ten dollars.

Q2. A building society issues a one-year bond that entitles the holder to the return on a weighted-average share index (ABC500) up to a maximum level of 30% growth over the year. The bond has a guaranteed minimum level of return so that investors will receive at least x% of their initial investment back. Investors cannot redeem their bonds prior to the end of the year.

The volatility of the ABC500 index is 30% pa and the continuously compounded risk-free rate of return is 4% pa. Assuming no dividends, use the Black-Scholes pricing formulae to determine the value of x (to the nearest 1%) that the building society should choose to make neither a profit nor a loss. Explain how the building society can use a combination of call and put options to prevent making a loss on these bonds.

Q3. How many years will it take $8,000 to grow to $14,400 if it is invested at 3.50% compounded? continuously?

Q4. A newborn child receives a ?$5 comma 000 gift toward a college education from her grandparents. How much will the ?$5 comma 000 be worth in 17 years if it is invested at 4.9?% compounded? quarterly?

Q5. What type of financial records do businesses need to maintain in order to keep track of their transactions?

Q6. Discuss the primary responsibilities of financial information management

Q7. How do ethics relate to risk management

Q8. Company ROOS is partly financed with a bond loan. The bonds are so-called 'level coupon bonds'. The nominal value of each of the bonds is €1.000 and the coupon 3%. The coupon is paid annually. The remaining maturity of the bonds is 4 years. The yield to maturity of the bonds is 6%. Assume there is no default risk.

Calculate the price of a bond. Show your calculations.

At what market interest rate does the price of the bond equal the nominal value?

Q9. How much would you need to deposit in an account each month in order to have $10,000 in the account in 8 years? Assume the account earns 8% interest.

Q10. Sandy bought 100,000 shares of stock at $1.50. The following week the price of the stock fell to $.75. How many shares of stock does Sandy need to buy to have an average price of $.75?