What is annual rate of interest with continuous compounding

Assignment Help Financial Management
Reference no: EM13890124

(a) Find the present value for a payment of $10; 000 to be received in 3,5 years, if the annual interest rate is 4% that: (i) compounded monthly; (ii) compounded continuously.

(b) What is the annual rate of interest with continuous compounding is equal to 10% per annum with monthly compounding.

Reference no: EM13890124

Questions Cloud

What are eoq and total inventory costs if the were to occur : What are the EOQ and total inventory costs if the following were to occur? (1) Sales increase to 500,000 units. (2) Fixed order costs increase to $30; sales remain at 338,000 units. (3) Purchase price increases to $4; sales and fixed costs remain at ..
Two parties in any lease contract-lessee and the lessor : There are two parties in any lease contract - Lessee and the lessor. To a lessor, a lease analysis involves a capital digesting analysis of the property or equipment to be leased. The lessor's decision is either to purchase and lease-out the asset, o..
Arbitrage argument by constructing two appropriate portfolio : Prove via a no-arbitrage argument by constructing two appropriate portfolios that the value of an American call is equal to the value of a European call.
Considering refinancing my house : I have been considering refinancing my house. To do so, I will need to borrow $250,000. The loan period is 30 years and payments are made monthly. Several months ago I could have gotten a loan at 3% APR, but today the APR is 5.25%. How much additiona..
What is annual rate of interest with continuous compounding : Find the present value for a payment of $10; 000 to be received in 3,5 years, if the annual interest rate is 4% that: (i) compounded monthly; (ii) compounded continuously. What is the annual rate of interest with continuous compounding is equal to 10..
Compute its current yield to maturity if the bonds price : Assume that you have just purchased a 3-year bond that is red empted at par with face value $1,000 and pays coupons semi-annually with annual rate 8%. If the bond is currently trading at a yield of 6%. Compute Its current price. Its current yield to ..
Complete the proof of no arbitrage lemma for equality cases : Complete the proof of the “no arbitrage lemma” for the equality cases. We know for the put-call-parity that an European call is equivalent to an European put plus a future that have the same strike price and maturity assuming the underlying stock pay..
Investor lose or gain if exchange rate at end of contract : An investor enters into a short forward contract on 100 million yen. The forward exchange rate for US$ 1 is set at US$0.012 per yen. How much does the investor lose or gain if the exchange rate at the end of the contract is (i) US$0.011 per yen, and ..
When the underlying stock pays dividends : When the underlying stock pays dividends, exhibit a scenario in which early exercising an American call could be more beneficial than holding it till expiry. Even though the underlying stock pays no dividend and the riskless rate is positive, exhibit..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Sufficient funds to pay cash for entire construction project

Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $29 million. The CEO of the firm is quite conservative and will only do this when the company has sufficient funds to pay ..

  weight used for equity in the computation of Sportss WACC

Sports Corp has 11.5 million shares of common stock outstanding, 6.5 million shares of preferred stock outstanding, and 2.5 million bonds. If the common shares are selling for $26.5 per share, the preferred share are selling for $14.0 per share, and ..

  Considering expanding its wine-making operations

Lakeside Grapes is considering expanding its wine-making operations. They would need new equipment that costs $390,000 that would be depreciated on a straight-line basis to a zero balance over the 5-year life of the project. The estimated salvage val..

  Trade credit-increasing accounts payable

The Thompson Corporation projects an increase in sales from $1 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing a..

  What is the future value-assume annual compounding

What is the future value of $1,200 a year at the end of each year for 40 years at 8 percent interest? Assume annual compounding.

  Show how to calculate the present value of this project

The Newport Beach Sanitary Agency is presently shipping its waste to another municipality at an annual cost of $100,000. It is considering building a landfill near the city. Show how to calculate the present value of this project. Explain why the IRR..

  Manufacturing firm-how many decision alternatives are there

A small manufacturing firm is considering the purchase of a new machine. Two types of machines are available on the market. The lives of Machine A and Machine B are four years and six years respectively, but the firm does not expect to need the servi..

  Calculate the outstanding loan balance immediately

A loan is amortized over five years with monthly payments (i.e. end of month) at an annual nominal interest rate of 5% compounded monthly. The first payment is 500 and is to be paid one month from the date of the loan. Calculate the outstanding loan ..

  Fixed-rate mortgage-how large can his mortgage be

A homeowner is looking to buy a home in Marvin Gardens. The most he can afford to pay in total is $1,800 per month. Yearly property taxes will be about $3,000 (escrowed monthly) and insurance is $110 per month. There are no other costs. If mortgage r..

  What was clantons gross profit margin

In 2002 Clanton, Inc. had a gross profit of $27,000 on sales of $110,000. Clanton's operating expenses for 2002 were $13,000, and its net profit margin was .0585. Clanton had no interest expense in 2002. What was Clanton's gross profit margin for 200..

  What is NAL for Wildcat-computer-assisted drilling system

The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; What is the NAL for Wildcat? What is..

  What is the amount of the operating cash flow

Hot and Cold has annual sales of $982,000, annual depreciation of $127,000, and net working capital of $243,000. The tax rate is 34 percent and the profit margin is 6 percent. The firm has no interest expense. What is the amount of the operating cash..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd