Using the mathematical equivalence formulae

Assignment Help Financial Management

Reference no: EM131825220

Show your cash flow diagrams

Find the solution using the mathematical equivalence formulae (such as F=P(1+i)n), substitute and solve (with your calculator not with the tables) for the final answer

Solve by using the proper equivalence expressions (such as F = P(F/P, i, n)) and the tables of equivalence factors.

Draw a box around your final answers.

APR = Annual Percentage Rate

1. An entrepreneur tells you that if you invest in his company, he will give you the equivalent of 20% APR (annual percentage rate) for five years. (no monthly compounding) At the end of five years, he will pay you back in a lump sum of $80,000. How much do you invest in this opportunity today to achieve the 20% APR? Show a cash flow diagram. Show your work and final answer(s).

2. You invest in a scheme that will pay you $4000 at the end of each of the next six years, plus a lump sum payment of $40,000 when the six years are up. If this scheme boasts a 15% APR (annual percentage rate), how much must you invest in this opportunity today to achieve the 15% APR? Show a cash flow diagram. (no monthly compounding) Show your work and final answer(s).

Reference no: EM131825220

Questions Cloud

What is the yield to maturity on the bonds : What is the yield to maturity on the bonds if you purchased the bond today?

What is the price today for delicious mills bond : Delicious Mills, Inc. issued 30-year to maturity bonds that had 7.43 percent annual coupon rate, paid semiannually. what is price today for Delicious Mills bond

Least prudent in terms of risk management strategy : Which of the following planning recommendations is least prudent in terms of risk management strategy?

Retirement date : You want to accumulate $1 million by your retirement date, which is 25 years from now. How much must your first deposit be if you are to meet your goal?

Using the mathematical equivalence formulae : Find the solution using the mathematical equivalence formulae (such as F=P(1+i)n), substitute.

What is the addition to retained earnings : What is the addition to retained earnings?

Calculate the company income taxes : The SGS Co. had $229,000 in taxable income. Use the rates from Table 2.3. Calculate the company’s income taxes.

What is the current market price of bonds : The current market rate of interest on the Bright Sun bonds is 8.67 percent. What is the current market price (intrinsic value) of the bonds?

Covariance of minimum variance portfolio : What is the covariance of the minimum variance portfolio with the S&P index?

User Account

All Pages