The price of a bond is calculated by summing the present

Reference no: EM13363696

The price of a bond is calculated by summing the present value of 2 sets of future cash flows. The first is an annuity of equal interest payments and the second is a single cash flow of the (return of the) face amount occurring on the final payment date. We express this mathematically as:

Bond Price = C/r [1-1/(1+r)^n]+ (FACE)/(1+r)^n

If the Face Amount of a bond is $1000, and the bond pays interest of $80 per year for 10 years, what is the price of this bond? Assume
Answer
A. $875.68
B. $1000.00
C. $1276.95
D. $1345.54

Question

Ashley's cousin, Vinnie, the loan shark charges 2%/day on his loans. Since he has not had the benefit of a finance course, he charges simple interest. Accordingly, how many days would a $1000 loan from Vinnie turn into a $2000 debt for the borrower? (nb: At the instant the $1000 loan is made, the debt is $1000)
Answer

A. 25 days
B. 35 days
C. 50 days
D. 100 days
E. 104 days

Question

After taking this course, and learning about compounding interest, Vinnie The Loan Shark is now careful to tell his customers that his rate is "2% compounded daily". Under this condition, how many days will it take for the same borrower of $1000 to owe Vinnie $2000?
Answer
A. 25 days
B. 35 days
C. 50 days
D. 100 days
E. 104 days

Question

Given the tax rates as shown, what are the taxes due for a firm with taxable income of $310,000?
Taxable Income Tax Rate
$ 0 - 50,000 15%
50,001 - 75,000 25%
75,001 - 100,000 34%
100,001 - 335,000 39%
Answer
A. $22,250
B. $30,830
C. $52,150
D. $104,150
E. $120,900

Question

Given the tax rates as shown, for a firm with taxable income of $310,000, what is the Marginal Tax Rate?
Taxable Income Tax Rate
$ 0 - 50,000 15%
50,001 - 75,000 25%
75,001 - 100,000 34%
100,001 - 335,000 39%
Answer
A. 21.38%
B. 15%
C. 25%
D. 33.60%
E. 39.00%

Question

Alejandro's Flea Market has sales of $4,500, total debt of $1,300, total equity of $2,400 and a profit margin of 5 percent. What is AFM's return on assets?
Answer
A. 4.99%
B. 6.08%
C. 7.39%
D. 9.36%

Question 7

As the discount rate decreases, the present value of $1 to be received 50 years from now:
Answer
A. Remains constant.
B. Also decreases.
C. Increases.
D. Becomes negative.

Question

Imprudential, Inc. has an unfunded pension liability of $650 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 7.5 percent, what is the present value of this liability?
Answer
A. $153,018,546
B. $155,793,400
C. $155,993,400
D. $157,018,546
10 points

Question

Gitlen Financial wants your structured settlement!! At 10:00 am GF bought Sean the Surfer's structured settlement and they (Sean and GF) agreed to a discount rate of 13%. If Sean was scheduled to receive $10,000/year for 10 years, how much did Gitlen Financial pay Sean for his structured settlement?
Answer
A. $54,262
B. $58,622
C. $70,235
D. $76,923
10 points

Question

At 2:00 pm on the same day (see above question), Gitlen Financial re-sold (to Mr. Joe Savvy) the structured settlement originally owned by Sean the Surfer. The two parties (Mr. Savvy and GF) agreed to a rate of 7%. How much did Mr. Savvy pay GF for the same $10,000 for 25 years?
Answer
A. $54,262
B. $58,622
C. $70,236
D. $76,923

Reference no: EM13363696

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