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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 2year 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.
13What is the modified duration of a sevenyear par value bond that has a coupon rate of 9%? Use the approach where you have to calculate weights for each cash flow.
14Calculate the duration of a tenyear level annuity with annual yield of 9%.
Hint: D = (1+y)/y ? T/((1+y)^T 1)
15Salmon 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?
16Consider 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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