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1. His recently departed dear Aunt Annie, may she rest in peace, has left Tom a 6-year annuity paying $4,500 per year. He will receive the first payment 4 years from today. If he is discounting at 7% (EAR), what is the present value of his inheritance?
2. This question is based on American Express Bank’s card member agreement. This agreement is a contract between a credit card holder and American Express Bank. In what follows, assume that the Prime Rate as defined by the agreement is 0% and your APR for purchases is Prime Rate + 11.99%, and hence you are paying 11.99% APR on balances you carry. Assume that you are planning to carry the balance for one month and your average daily balance, as defined by the agreement, will be exactly $1,000 every day. There are 30 days in the month. Answer the following questions:
a. According to the card member agreement, how much interest will you have to pay at the end of the month?
b. Does American Express calculate the interest within one month as simple or compound interest?
c. What is the effective annual rate (EAR) that American Express charges the card holder?
suppose your friend pat approaches you with a plan to get in on the solar panel leasing business. pat has identified an
Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 40% debt and 60% equity; however, the CEO believes the firm should use more debt. The risk-free rate, rRF, is 6%; the market risk pre..
In using asymmetric information, it could be explained that businesses maintain a reserve borrowing capacity to take advantage of good investment opportunities and, at the same time, avoid having to issue stock at distressed prices that will discoura..
Your company has been approached to bid on a contract to sell 5,200 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible.
use the internet to research the apple corporation its current position and reputation regarding ethical and social
The market consists of the following stocks. Their prices and number of shares are as follows: The price of Stock C doubles to $60, what is the percentage increase in the market if a S&P 500 type of measure of the market is used? Repeat question (a)..
Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $820,322, $863,275, $937,250, $1,018,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..
Suppose by the time you graduate your student loan will accumulate to $33,000, the national average for college graduates of 2014. If you plan to pay back the loan in 5 years with equal monthly payment, and assume the interest rate is 6% compounded m..
Consider two investments that you can make. You can either buy a share of stock in a company that will pay a dividend of $ 46 every year into the foreseeable future, or a buy a special type of bond that will start paying the same $ 46 in one year, ca..
Debt can be a double-edged sword, depending upon the interest rates and the return on the investment. Debt is generally part of a company's financial structure. The upcoming discussion topic is about the financial structures of MNEs.
A firm has an asset base with a market value of $5.3 million. Its debt is worth $2.5 million. If $0.2 million is paid in interest annually and the shareholders expect a 16% annual return, what is the weighted average cost of capital assuming no corpo..
Find the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r% year compounded m times a year.
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