Finance Problems - 1555 Words

Finance Problems Present value is the amount of money required today to produce, using prevailing interest rates, a given amount of money in the future. Future value is the amount of money in the future that a certain amount of money today will yield, given prevailing interest rates. Time value of money calculations are useful for retirement planning purposes. If one assumes that a given amount will be available upon retirement, then one can determine the present value of that future amount. Or, if one sets aside a certain amount today, one can determine the future value of that current sum and therefore plan for retirement expenses. The required rate of return influences the amount to be invested as well as the risk profile, including risk tolerance, investment goals, and horizon. A loan amortization schedule is a schedule of payments for paying off a loan. An amortization schedule breaks down the payments into interest and principal, which is useful because these amounts vary with each amortized loan payment. Determine the loan interest rate by dividing the interest payment by the month one loan balance. Assuming the same principal balance, one would choose the loan with the lowest interest rate. If a lower monthly payment is needed, then one would extend the loan over a longer period by choosing to make more payments. (a) There is a risk of default, which occurs when a company fails to pay an interest or principal payment as scheduled. Interest rate risk affects theShow MoreRelatedWhat Problems Would the Minister of Finance Encounter in the Process of Budget Formulation and Implementation in Zambia?1958 Words   |  8 PagesWhat problems would the minister of finance encounter in the process of budget formulation and implementation in Zambia? The national annual budget is a document containing various government activities or work programmes expressed in monetary form. Thus, the budget is an important economic policy tool for macroeconomic management and resource allocation. It provides a comprehensive statement of the nation’s economic priorities. Accordingly, the budget formulation process has four major dimensionsRead MorePractice Problems on Finance1085 Words   |  5 Pages1. Stiles Corporation issues a new series of bonds on January 1, 1982. The bonds were sold at part ($1000), had a 12% coupon, and matured in 30 years, on December 31, 2011. Coupon payments are made semiannually (on June 30 and December 31). a) What was the YTM on January 1, 1982? - Explain b) What was the price of the bonds on January 1, 1987, 5 years later, assuming that interest rates had fallen to 10%? (Show in equation form, plug all the relevant numbers and without calculation, say whetherRead MoreProblems from Corporate Finance1005 Words   |  5 PagesProblems form Corporate Finance 1. Compute the following: Present Value | Years | Interest Rate | Future Value | $227,382 | 20 | 5 | | | 16 | 17 | $886,073 | $25,000 | 18 | | $143,625 | $1,941 | | 5 | $3,700 | 2. At 9 percent interest, how long does it take to double your money? To quadruple it? 3. In 2006, a gold $3 coin minted in 1879 was auctioned for $9.000. For this to have been true, what was the annual increase in the value of the coin? 4. You can earn 0Read MoreInternational Finance Problems Essay746 Words   |  3 PagesPROBLEMS 1. Mississippi Mud Pies, Inc. needs to buy 1,000,000 Swiss francs (CHF) to pay its Swiss chocolate supplier. Its banker quotes bid–ask rates of CHF1.3990–1.4000/USD. What will be the dollar cost of the CHF1,000,000? †¨Answer: The bank’s bid rate is CHF1.3990/$. That is the price at which the bank is willing to buy $1 in return for CHF1.3990. The bank sells dollars at its ask price CHF1.4000/$.†¨Mississippi Mud Pies must sell dollars to the bank to buy CHF. Therefore Mississippi Mud PiesRead MoreFinance and Accounting: Practice Problems4710 Words   |  19 PagesAIS 301 Final Exam Review Note: This hand-out is designed to provide additional review materials for your exam. The practice problems included are not all inclusive and this should be reviewed in conjunction with your practice exam, coursepacket materials and homework problems. Chapter 14 1. On January 1, 2007, Ann Rosen loaned $45,078 to Joe Grant. A zero-interest-bearing note (face amount , $60,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaidRead MoreFinance Chapter 8 Interative Problem1082 Words   |  5 PagesChapter 8 Integrative Problem Assume that you recently graduated with a major in finance, and you just landed a job in the trust department of a large regional bank. Your first assignment is to invest $100,000 from an estate for which the bank is trustee. Because the estate is expected to be distributed to the heirs in approximately one year, you have been instructed to plan for a 1-year holding period. Furthermore, your boss has restricted you to the following investment alternatives, shownRead MoreCorporate Finance Ch.8 Problems1985 Words   |  8 PagesQuestions and Problems Page 1 of 3 Corporate Finance eBook 9/e Content Chapter8: Interest Rates and Bond Valuation Questions and Problems 1. Valuing Bonds What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is: BASIC (Questions 1– 12) a. 5 percent? b. 10 percent? c. 15 percent? 2. Valuing Bonds Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 25 years Coupon rate: 7 percent Semiannual payments Calculate the price ofRead MoreCorporate Finance: Sample Test Problems1236 Words   |  5 Pagesï » ¿Sample Test Problems 9.1 Which type of secondary market provides the most efficient market for securities? 9.2 Is preferred stock classified as debt or equity? 9.3 Burnes, Inc. is a mature firm that is growing at a constant rate of 5.5 percent per year. The firm’s last dividend was $1.50. If the required rate of return is 12 percent, what is the market value of this stock assuming dividend growth equals the growth rate of the firm? 9.4 Abacus Corp. will pay dividends of $2.25, $2.95 and $3.15Read MorePersonal Finance Problem - Linear Programming973 Words   |  4 PagesPERSONAL FINANCIAL INVESTMENT STRATEGY ANALYSIS [pic] PROBLEM: Bob and Pina Ing, 31 and 28, a newly-wed couple found themselves in the midst of an interesting decision making problem. It appeared that their fortune had turned overnight when they won a mega lottery and received one million dollars after tax in price money. They were confused about how to invest their money, such that it gives them the maximum return on their investment. The couple consulted Jayhawks Financial Services LLCRead MoreThe Major Sub Areas Of Finance1156 Words   |  5 Pages1. Define the terms finance and financial management, and identify the major sub-areas of finance. Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and