What is the current market price of the bonds

Assignment Help Financial Management

Reference no: EM133658722

Assignment

Task I

Why is the concept of time value of money important in the corporate context? Justify your answer. A complete post includes an explanation supported by examples and a minimum of 2 research sources. Your post must be substantive and demonstrate insight gained from the course material. A substantial post accomplishes one or more of the following:

1. Discusses the application of time value of money in the corporate setting
2. Offers additional research or examples, in support of the original answer
3. Describes implications of the time value of money concept for capital project financing
4. Compares and contrasts management practices in relation to corporate funds

Task II

Assume that you are nearing graduation of your MBA program and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions.

A customer of the bank, Raj Kami, wants to deposit $100,000 in a savings account that pays a nominal rate of 8%.

1. If the bank compounds interest annually, how much will the customer have in his account 3 years from now?

2. What would the balance be in 3 years from now if the bank used quarterly compounding rather than annual compounding?

3. If Raj Kami deposited the $100,000 in 4 equal payments of $25,000 each at the end of years 1, 2, 3, and 4. How much would he have in the savings account at the end of year 4, based on 8% annual compounding?

4. Raj Kami wants to know how long it will take his sum of money to double if the growth rate per year is 8%

5. Raj Kami wants to buy a car, and a local bank will lend him $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? What is the loan's effective (or equivalent) rate EFF?

6. What is the present value of $100,000 to be received in 4 years if the appropriate interest rate is 5%?

7. Jackson Corporation's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds?

8. Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 10 years, have a face value of $1,000, and a yield to maturity of 9%. What is the price of the bonds?

9. Wilson Wonders's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $900. What is their yield to maturity?

10. What is the present value of a perpetuity that pays $1,000 per year if the appropriate interest rate is 5%?

Reference no: EM133658722

Questions Cloud

Position-paper although born out of good intentions : Position-paper Although born out of good intentions, national interest has proved time and time again to lead to bloodshed,

Cyber security risk management : NIST states that the Framework key functions to aid an organization in expressing its cybersecurity risk management by organizing information,

Interns are reflecting on cybersecurity issues : Interns are reflecting on cybersecurity issues that must be considered when employees travel for business.

What are simple things that parents can do to support : What are simple things that parents can do to support optimal psychosocial, cognitive, and physical development in the first three months of life

What is the current market price of the bonds : What is the present value of $100,000 to be received in 4 years if the appropriate interest rate is 5%? What is the current market price of these bonds?

Health facility using cloud storage for data backup : A health facility using Cloud Storage for data backup is compliant with HIPAA Privacy Rule if they have a business associate agreement.

Concrete evidence of malicious intent : As part of the evidence gathering, the Attorney General needs concrete evidence of malicious intent.

What are you trying to find and achieve : CORP 3171- Clarify the aim of your study (what are you trying to find and achieve); state your research objectives and questions.

Security risks with iaas component of compute : What are the security risks with IaaS component of Compute, including at least one vulnerability to attack,

User Account

All Pages