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Suppose you can afford to invest $1000 at the beginning of each month in hopes to save for retirement at the age of 65. For both the annual rates r = 3.2% and r = 8.05%, compounded monthly:
A. Calculate the total future value of the account when you are 65 assuming you start this process as soon as you turn 23 (so you invest for 42 years total).
B. Calculate the total future value of the account when you are 65 assuming you start this process as soon as you turn 30 (so you invest for 35 years total).
C. Calculate the total future value of the account when you are 65 assuming you start this process as soon as you turn 40 (so you invest for 25 years total).
The current price of a non-dividend paying stock is $30. Use a two-step tree to value an American put option on the stock with a strike price of $32 that expires in 3 months. Each step is 1.5 months, the risk free rate is 8% per annum with continuous..
Paul's Boats has sales of $680,000 and a Net Profit Margin of 5.2 percent. The annual depreciation expense is $74,000. The tax rate is 34 percent. What is the amount of the operating cash flow if the company has no long-term debt?
Calculating Profitability Ratios Shelton Inc. has sales of $17.5 million, total assets of $13.1 million, and total debt of $5.7 million. If the profit margin is 6 percent, what is the net income? What is ROA? What is ROE?
Internal rate of return. ABC firm sells extended warranties for its washing machines. When ABC sells the warranty, it receives cash upfront, but later ABC must cover any repair costs that arise. ABC is considering a warranty for a new line of TVs. A ..
Suppose you have the choice of investing in (A) a zero-coupon bond, which costs $500 today, pays no coupon during its life, compounds semi-annually, and then pays $1,000 after 10 years, or (B) a bond which costs $1,100 today, pays $45 in interest sem..
You have obtained the following data for a firm: (1) Rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) Rf = 3.00%, RPM = 6.00%, and beta = 1.25. (3) D0 = $1.20, P0 = $35.00, and g = 6.00% (constant). You ..
Suppose a company has a pre-IPO value of $50 million, has 2 million existing shares, needs $9.7 million in net proceeds, and the investment charges a 6% spread. What is the percentage of shares required by new investors?
Assume that the 3-month futures contract on SPX settled at 2070, r = 0.25%, q = 2.25%, arbitrage transactions costs (TC) involving these futures contract are 1.16 (index points). The TC band is [2060.84, 2058.52]. Therefore, the index (SPX) must have..
The fully-indexed rate on a 5/1 ARM with a maturity of 30 years is determined by the yield on the one-year LIBOR plus a margin of 250 basis points. If the fully-indexed (composite) rate is currently 6%, what is the current yield on the one-year LIBOR..
The bid-ask spread on a security is the difference between:
The total market value of Okefenokee Real Estate Company's equity is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.4 and that the expected risk premium on the market is 1..
Three years from now you will begin receiving annual payments of $7,200. This will continue for 14 years. At a discount rate of 5.8% what is the present value of this stream of cash flows?
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