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1. Five years ago you took out a 15-year mortgage with biweekly payments (you make a payment every two weeks) to purchase your home. The interest rate is 7% per year and the biweekly payment is $800. What is the outstanding balance on the mortgage if there are 10 full years left on it? Assume there are exactly 52 weeks in a year.
2. Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their child's college education. They decide to make deposits into an educational savings account on each of their daughter's birthdays, starting with her first birthday in one year (this is year 1). Assume that the educational savings account will return a constant 9%. The parents deposit $2,400 on their daughter's first birthday and plan to increase the size of their deposits by 7% each year. Assuming that the parents have already made the deposit for their daughter's 18th birthday (this is year 18), then the amount available for the daughter's college expenses on her 18th birthday is closest to:
A bond that pays interest annually yields a rate of return of 6.00 percent. The inflation rate for the same period is 2 percent. What is the real rate of return on this bond?
If the market yield is 18% p.a. compounding semi-annually, how much did you spend?
Explain how an increase in the interest rate in Europe would affect the interest rate in the United States and the dollar-euro exchange rate under the theory of Interest Parity Condition. What factors does this theory leave out?
Killer Whale, Inc. has the following balance sheet statement items: current liabilities of $619,975; net fixed and other assets of $1,532,290; total assets of $3,477,630; and long term debt of $633,373. What is the amount of the firm's current assets..
Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 7%, paid annually. Today, the debt is selling at $1,160. If the firm’s tax bracket is 20%, what is its after-tax cost of debt?
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $28,500 per month for 25 years, with the first payment received 30 years and 1 month from now. If he can..
For the case showing in the following table calculate the future value of the single cash flow deposited today at the end of the deposit period of the interest is compounded annually at the rate specified. Single cash flow= 25000 Interest rate 15% De..
The two-year interest rate is 11.2% and the expected annual inflation rate is 5.6%. a. What is the expected real interest rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected real interest rate 5.30 % b-1. I..
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 $817,322, $863,275, $937,250, $1,019,610, $1,212,960, and $1,225,000 over the next six years. An investment of $83 gen..
A call option expiring in 2 months has a market price of $10.40. The current stock price is $60, the strike price is $50, and the risk-free rate is 4% per annum. Calculate the implied volatility.
Wayco Industrial Supply has a pretax cost of debt of 7.6 percent, a cost of equity of 16.8 percent, and a cost of preferred stock of 9.1 percent. The firm has 220,000 shares of common stock outstanding at a market price of $27 a share. There are 25,0..
Examine how current and projected future economic conditions affected your selections for the portfolio. Discuss at least three specific, relevant economic factors.
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