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[solution]: MBA536 Homework due Next Class 9/9/2013 Assuming simple interest


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MBA536 Homework due Next Class  9/9/2013

 

Assuming simple interest how much will you have in an account if you deposit $10,000 for 6 months (182 days) at 7.75%?

You make four quarterly payments of $425.60 on a $1400 loan. What annual interest rate are you paying?

What is the effective rate of interest on an APR of 6% compounded monthly?

What is the future value of $6000 at a nominal rate of 6.75% compounded quarterly for 5 years? What is the future value if it is compounded continuously?

Convert a rate of 5.25 % compounded semiannually to an a) equivalent continuous rate to b) an equivalent quarterly rate =

What is the HPR of a 100 shares of stock you purchased for $5/share and sold for $8/share and paid you a dividend of $1/

If you held the above stock for 3 months what is the annualized HPR?

You invest $6,000 that becomes $15,000 in 8 years. What is the effective annual percentage rate?

Below is the end of year stock price sequence in chronological order for Microsoft Corp.  What is there stock price Growth Rate using the GM? Check your answer by doing it in three methods.

Year

Stock price

2005

$14.00

2006

$15.50

2007

$15.75

2008

$13.80

2009

$14.00

2010

$17.00

2011

$12.00

2012

$16.00

2013

$16.70

2014

$15.25

Calculate the Arithmetic and Geometric growth rate for a company with the following EPS data

$.32

$.45

$.55

$.48

$.40

$.90

$.85

$.80

$1.30

$1.60

Show that the Arithmetic mean is incorrect.  .

Given the following info calculate the personal rate of return for this portfolio for Jan, Feb, and Mar and the first quarter of 1998 using the Modified Dietz Method.

date

Market value $

Cash flow $

MC post cash flow $

12/31/97

200,000

1/31/98

208,000

2/16/98

217,000

40,000

257,000

2/28/98

263,000

3/22/98

270,000

-30,000

240,000

3/31/98

245,000

12- You are considering the purchase of a 2-year bond (semiannual interest payments) with a coupon rate of 8% and a current price of $964.54. The bond is callable in one year at a premium of 3% over the face (par) value. Assume that interest payments will be reinvested at 9% per year, and that the most recent interest payment occurred immediately before you purchased the bond. Calculate:

The Current Yield

The Yield to Maturity

The Yield to Call

The Total (Realized) Return if the bond is called and not called.

13-What is the modified duration of a seven-year par value bond that has a coupon rate of 9%? Use the approach where you have to calculate weights for each cash flow.

14-Calculate the duration of a ten-year level annuity with annual yield of 9%.

Hint: D = (1+y)/y ? T/((1+y)^T -1)   

15-Salmon Fraser Corp. stock has the following probability distribution of expected prices one year from now:

State    Probability      Price

1             25%               $50

2            40%                $60

3            35%                $70

If you buy Salmon Fraser today for $55 and it will pay a dividend during the year of $4 per share,

what is your expected holding period return on Salmon Fraser stock?

16-Consider the following probability distribution of returns for stocks A and B. Show ALL

calculations, not just answers.

State        Probability            Return on Stock A        Return on Stock B

1              0.10                            10%                                  8%

2              0.20                            13%                                 7%

3              0.20                           12%                                  6%

4              0.30                           14%                                  9%

5              0.20                           15%                                  8%

a. What are the expected rates of return of stocks

b. What are the standard deviations of stocks ?

17- How many stocks are in The Dow Jones Industrial Average and how is it calculated?

18- Computation of Macaulay duration:

       a.  YTM = 6%

(1)

                    (2)

              (3)

                 (4)

             (5)

Time Until Payment (in years)

Payment

PV of Payment Disc. at 6%

Weight of each Payment

Column (1)  ´ Column (4)

1

60

   

  

2

60

       

3

1060

        

Column Sum

        

      

       b.  YTM = 10%

(1)

             (2)

    (3)

       (4)

    (5)

Time Until Payment  (in years)

Payment

PV of Payment Disc. at 10%

Weight of each Payment

Column (1)  ´ Column (4)

1

60

2

60

         

3

1060

        

Column Sum

         

 


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