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Identify the problem – All information needed to identify the problem is included in the case, and the student must select the needed information and represent it in a simplified form, which could be a combination of words and graphical representations. Explain the strategy for solving the problem – Although there may be more than one way to solve a problem, the student must choose a method and explain how it will be applied. Application of solution tools – The student must apply mathematical and logical tools to solve the problem. These may include formulae, logical deductions, and other appropriate devices. Describe the solution – The student must provide a solution to the problem. The quality of the solution will be evaluated. The grade you receive on this assessment will be part of your final course grade. Please make sure that you address all four parts of the evaluation rubric. Mini-Case Problem
A recent college graduate has taken a new job at Work LLC, and since the company does not offer a traditional pension plan, she plans to take advantage of a tax-free investment account backed by a reputable financial institution that offers a guaranteed 8% annual return for as long as she lives. The graduate plans on working for 45 years before retiring and will save a fixed amount each year until retirement, starting at the end of this year and continuing for all 45 years of work. Once she is retired, she expects to be able to live on the equivalent of $30,000/year in today’s terms in addition to expected social security payments. She expects annual inflation to be 4% per year over her life. She doesn’t know how long she will live, but knows that with medical advancements, it could be for a very long time. Since one of her great fears is that she will outlive her savings, she plans to arrange retirement funding that will be in place if she were to live “forever” with the understanding that her heirs will inherit the remainder when she dies. If she wants to save a fixed amount each year, starting with one year from now until her 45th work anniversary, how much does she need to save each year?
The BOP of Japan showed the following entries for 2010: a capital account surplus of 50, a deficit in the services account of 15, and a trade deficit of 45. The change in the official reserves was zero. What was the balance of unilateral transfers fo..
You want to buy a new sports coupe for $74,500, and the finance office at the dealership has quoted you an APR of 5.6 percent for a 48 month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?
Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. a. Find the modified duration. b. Refer to part a. If the interest increases by 25 basis points, what is the exact change in price? c...
The Carver Paper Company has decided to acquire a $300,000 pulp quality control Machine that has a useful life of 10 years. A salvage value of $50,000 is expected at the end of year 10. The machine would be depreciable on the straight line basis with..
Suppose Petron "management team will choose the strategy that leads to the highest expected value of Petron's equity. Which strategy will management choose if Petron currently has no debt, debt with face value of $20million and $40 million?
Suppose that the annual growth in real income in Japan is expected to be between 2 and 3 percent and that income elasticity of demand for housing in Tokyo is estimated to be between 0.8 and 1.0 for rental units and between 0.7 and 1.5 for owner-occup..
A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of 400 options. The options are worth $11, $14, and $18. What is the maximum net gain (after the cost of the options is taken into account)?..
The one-month risk free rate is 0.4%. Risky asset A has a mean return of 1.50% a month and a standard deviation of 10%. Risky asset B has a mean return of 0.8% a month and a standard deviation of 5%. What is the portfolio with the highest Sharpe rati..
In weighted average cost of capital (WACC), what is more expensive to finance a project with for an organization - common stock or preferred stock?
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..
As a financial manager, what can you do to make sure your company stays solvent and is not too liquid? How do you determine if the company has too much liquidity?
What are the components of noninterest expense?
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