“1
You are scheduled to receive $30,000 in two years. When you receive it, you will invest
it for 5 more years, at 6 percent per year. How much money will you have 7
years from now? If you received an additional $5,000 in year 4, what will be
the total amount 7 years from now?

2
A company
wishes to borrow $20 million to finance its growth. It will have to pay 8% for
a ten-year amortizing loan. What will be its annial payments? What will its
interest and principal payments in year 3? What will be the principal balance
at the end of year 3?

3
Explain
briefly the relationship between interest rates and present value and between
interest rates and future value.

4
You are the
beneficiary of a life insurance policy. The insurance company informs you that
you have two options for receiving the insurance proceeds. You can receive a
lump sum of $200,000 today or receive payments of $1,400 a month for 20 years.
You can earn 6 percent on your money. Which option should you take and why

5
One year ago,
Deltona Motor Parts deposited $16,500 in an investment account for the purpose
of buying new equipment three years from today. Today, it is adding another
$12,000 to this account. The company plans on making a final deposit of $20,000
to the account one year from today. How much will be available when it is ready
to buy the equipment, assuming the account pays 5.5 interest?

6
Explain the
relationship between compounding and future value and between compounding and
present value..

7
Sylvan Trees
has a 7 percent coupon bond on the market with ten years left to maturity. The
bond makes annual payments and currently sells for $842.10. What is the
yield-to-maturity? What will be the price of the bond when it has 5 years to
maturity assuming the same yield-to-maturity holds?

8
Bonner Metals
wants to issue new 18-year bonds for some much-needed expansion projects. The
company currently has 11 percent bonds on the market that sell for $1,459.51,
make semiannual payments, and mature in 18 years. What should the coupon rate be
on the new bonds if the firm wants to sell them at par?

9
Explain the
relationship between interest rates and bond prices and between maturity and
bond prices.

10
Upper Crust
Bakers just paid an annual dividend of $3.10 a share and is expected to increase
that amount by 4 percent per year. If you are planning to buy 1,000 shares of
this stock next year, how much should you expect to pay per share if the market
rate of return for this type of security is 12 percent at the time of your
purchase?

11
Combined
Communications is a new firm in a rapidly growing industry. The company is
planning on increasing its annual dividend by 15 percent a year for the next 4
years and then decreasing the growth rate to 3.5 percent per year. The company
just paid its annual dividend in the amount of $0.20 per share. What is the
current value of one share of this stock if the required rate of return is 15.5
percent?

12
Discuss how
the cumulative voting permits minority participation. Explain using a simple
example of selecting 6 board members out of 10 nominations.

13
You’ve
observed the following returns on Crash-n-Burn Computer’s stock over the past
five years: 2 percent, -12 percent, 16 percent, 22 percent, and 18 percent.
What is the standard deviation of these returns?

14
A stock had
returns of 12 percent, 16 percent, 10 percent, 19 percent, 15 percent, and -6
percent over the last six years. What is the geometric average return on the
stock for this period?

15
A stock is
expected to return 10% by the end of the year and its standard deviation is
estimated at 8%. Explain to grandma the range of expected prices for a stock
that is currently trading at $50 using 95% level of confidence.

1You are
scheduled to receive $30,000 in two years. When you receive it, you will invest
it for 5 more years, at 6 percent per year. How much money will you have 7
years from now? If you received an additional $5,000 in year 4, what will be
the total amount 7 years from now?2A company
wishes to borrow $20 million to finance its growth. It will have to pay 8% for
a ten-year amortizing loan. What will be its annial payments? What will its
interest and principal payments in year 3? What will be the principal balance
at the end of year 3?3Explain
briefly the relationship between interest rates and present value and between
interest rates and future value.4You are the
beneficiary of a life insurance policy. The insurance company informs you that
you have two options for receiving the insurance proceeds. You can receive a
lump sum of $200,000 today or receive payments of $1,400 a month for 20 years.
You can earn 6 percent on your money. Which option should you take and why5One year ago,
Deltona Motor Parts deposited $16,500 in an investment account for the purpose
of buying new equipment three years from today. Today, it is adding another
$12,000 to this account. The company plans on making a final deposit of $20,000
to the account one year from today. How much will be available when it is ready
to buy the equipment, assuming the account pays 5.5 interest?6Explain the
relationship between compounding and future value and between compounding and
present value..7Sylvan Trees
has a 7 percent coupon bond on the market with ten years left to maturity. The
bond makes annual payments and currently sells for $842.10. What is the
yield-to-maturity? What will be the price of the bond when it has 5 years to
maturity assuming the same yield-to-maturity holds?8Bonner Metals
wants to issue new 18-year bonds for some much-needed expansion projects. The
company currently has 11 percent bonds on the market that sell for $1,459.51,
make semiannual payments, and mature in 18 years. What should the coupon rate be
on the new bonds if the firm wants to sell them at par?9Explain the
relationship between interest rates and bond prices and between maturity and
bond prices.10Upper Crust
Bakers just paid an annual dividend of $3.10 a share and is expected to increase
that amount by 4 percent per year. If you are planning to buy 1,000 shares of
this stock next year, how much should you expect to pay per share if the market
rate of return for this type of security is 12 percent at the time of your
purchase?11Combined
Communications is a new firm in a rapidly growing industry. The company is
planning on increasing its annual dividend by 15 percent a year for the next 4
years and then decreasing the growth rate to 3.5 percent per year. The company
just paid its annual dividend in the amount of $0.20 per share. What is the
current value of one share of this stock if the required rate of return is 15.5
percent?12Discuss how
the cumulative voting permits minority participation. Explain using a simple
example of selecting 6 board members out of 10 nominations.13You’ve
observed the following returns on Crash-n-Burn Computer’s stock over the past
five years: 2 percent, -12 percent, 16 percent, 22 percent, and 18 percent.
What is the standard deviation of these returns?14A stock had
returns of 12 percent, 16 percent, 10 percent, 19 percent, 15 percent, and -6
percent over the last six years. What is the geometric average return on the
stock for this period?15A stock is
expected to return 10% by the end of the year and its standard deviation is
estimated at 8%. Explain to grandma the range of expected prices for a stock
that is currently trading at $50 using 95% level of confidence.”