1)Your finance text book sold 55,500 copies in its first year. The publishing company
expects the sales to grow at a rate of 21.0 percent for the next three years, and by 8.0
percent in the fourth year. Calculate the total number of copies that the publisher expects
to sell in year 3 and 4. (If you solve this problem with algebra round intermediate
calculations to 6 decimal places, in all cases round your final answers to the nearest
whole number.)
Number of copies sold after 3 years
Number of copies sold in the fourth year
2) Find the present value of $4,500 under each of the following rates and periods.
(If you solve this problem with algebra round intermediate calculations to 6 decimal
places, in all cases round your final answer to the nearest penny.)
a. 8.9 percent compounded monthly for five years.
Present value
$
b. 6.6 percent compounded quarterly for eight years.
Present value
$
c. 4.3 percent compounded daily for four years.
Present value
$
d. 5.7 percent compounded continuously for three years.
Present value
$
3) Trigen Corp. management will invest cash flows of $1,035,013, $681,628, $828,974,
$818,400, $1,239,644, and $1,617,848 in research and development over the next six
years. If the appropriate interest rate is 8.91 percent, what is the future value of these
investment cash flows six years from today? (Round answer to 2 decimal places, e.g.
15.25.)
Future value
$
4) You wrote a piece of software that does a better job of allowing computers to
network than any other program designed for this purpose. A large networking
company wants to incorporate your software into their systems and is offering to pay
you $467,000 today, plus $467,000 at the end of each of the following six years for
permission to do this. If the appropriate interest rate is 6 percent, what is the present
value of the cash flow stream that the company is offering you? (Round answer to the
nearest whole dollar, e.g. 5,275.)
Present value
5)
$
Barbara is considering investing in a stock and is aware that the return
on that investment is particularly sensitive to how the economy is
performing. Her analysis suggests that four states of the economy can
affect the return on the investment. Using the table of returns and
probabilities below, find
Probability
Return
Boom
0.3
25.00%
Good
0.3
15.00%
Level
0.1
10.00%
Slump
0.3
-5.00%
What is the expected return on Barbara’s investment? (Round answer to
3 decimal places, e.g. 0.076.)
Expected return
6) Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for
$973.52. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the
current price of the bonds is $1,097.87, what is the yield that Trevor would earn by
selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g.
1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
Effective annual yield
%
7) The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par
value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current
price of this preferred stock given a required rate of return of 13.0 percent? (Round
answer to 2 decimal places, e.g. 15.25.)
Current price
$
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