Financial Management
Answer the following (4) questions.
- Assume a $1,000 face value bond has a coupon rate of 9.5% paid semiannually and has an eight-year life. If investors are willing to accept a 12 percent rate of return on bonds of similar quality, what is the present value or worth of this bond?
- Use a financial calculator or computer software program to answer the following questions:
- What is the present value of $450,000 that is to be received at the end of 20 years if the discount rate is 10%?
- How would your answer change in (a.) if the $450,000 is to be received at the end of 15 years?
- You are considering borrowing $200,000 to purchase a new home.
- Calculate the monthly payment needed to amortize a 7% fixed-rate 30-year mortgage loan.
- Calculate the monthly amortization payment if the loan in (a.) was for 15 years.
Using the PVIFA table (table 9.4 in the textbook), determine the annual payment on a $600,000, 10 percent, business loan from a commercial bank that is to be amortized over a five-year period.
YPVIFA Table from text book
Year
5% 6% 7% 8% 9% 10%
1) 0.952 0.943 0.935 0.926 0.917 0.909
2) 1.859 1.833 1.808 1.783 1.759 1.736
3) 2.273 2.673 2.624 2.577 2.531 2.487
4) 3.546 3.465 3.387 3.312 3.240 3.170
5) 4.329 4.212 4.100 3.993 3.890 3.791
6) 5.076 4.917 4.767 4.623 4.486 4.355
7) 5.786 5.582 5.389 5.206 5.033 4.868
8) 6.463 6.210 5.971 5.747 5.535 5.335
9) 7.108 6.802 6.515 6.247 5.995 5.759
10) 7.722 7.360 7.024 6.710 6.418 6.145ear5%6%7%8%9%
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