Students should be able to calculate time value of money problems, business and finance homework help

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Students should be able to calculate time value of money problems including solving for; present value, future value, rate and payment, determine the value and yield of corporate bonds, and use the dividend discount model to calculate the value and expected return of a common stock.

Purpose of Assignment

Students should be able to calculate time value of money problems including solving for; present value, future value, rate and payment, determine the value and yield of corporate bonds, and use the dividend discount model to calculate the value and expected return of a common stock.

Assignment Steps

Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft®Office website. There are also additional tutorials via the web that offer support for office products.

Complete the following Questions and Problems from each chapter as indicated.

Show all work and analysis.

Prepare in Microsoft® Excel® or Word.

  • Ch. 5: Questions 2 (Concepts Review and Critial Thinking Questions section) and Questions 1, 2,3, 4 & 6 (Question and Problems section)
  • Ch. 6: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 2, 17, & 20 (Questions and Problems section)
  • Ch. 7: Questions 1 & 2 (Concepts Review and Critial Thinking Questions section) and Questions 3, 9, &11 (Questions and Problems section)
  • Ch. 8: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 1 & 6 (Questions and Problems section): Microsoft® Excel® template provided for Problem 6

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Purpose of Assignment Students should be able to calculate time value of money problems including solving for; present value, future value, rate and payment, determine the value and yield of corporate bonds, and use the dividend discount model to calculate the value and expected return of a common stock. Assignment Steps Complete the following Questions and Problems from each chapter as indicated. Show all work and analysis. Prepare in Microsoft® Excel® or Word. • • • • Ch. 5: Questions 2 (Concepts Review and Critial Thinking Questions section) and Questions 1, 2,3, 4 & 6 (Question and Problems section) Ch. 6: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 2, 17, & 20 (Questions and Problems section) Ch. 7: Questions 1 & 2 (Concepts Review and Critial Thinking Questions section) and Questions 3, 9, &11 (Questions and Problems section) Ch. 8: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 1 & 6 (Questions and Problems section): Microsoft® Excel® template provided for Problem 6 Chapter 5 Questions 2 (Concepts Review and Critial Thinking Questions section) 2. Compounding [LO1, 2] What is compounding? What is discounting? Questions 1, 2,3, 4 & 6 (Question and Problems section) 1. Simple Interest versus Compound Interest [LO1] First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made a deposit of $9,000 in each bank, how much more money would you earn from your Second City Bank account at the end of seven years? 2. Calculating Future Values [LO1] For each of the following, compute the future value: 3. Calculating Present Values [LO2] For each of the following, compute the present value: 4. Calculating Interest Rates [LO3] Solve for the unknown interest rate in each of the following: 6. Calculating Interest Rates [LO3] Assume the total cost of a college education will be $320,000 when your child enters college in 18 years. You presently have $67,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education? Ch. 6: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 2, 17, & 20 (Questions and Problems section) (Concepts Review and Critial Thinking Questions section) 1. Annuity Factors [LO1] There are four pieces to an annuity present value. What are they? 6. Present Value [LO1] Suppose two athletes sign 10-year contracts for $80 million. In one case, we’re told that the $80 million will be paid in 10 equal installments. In the other case, we’re told that the $80 million will be paid in 10 installments, but the installments will increase by 5 percent per year. Who got the better deal? (Questions and Problems section) 2. Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent? 17. Calculating Future Values [LO1] Fowler Credit Bank is offering 6.7 percent compounded daily on its savings accounts. If you deposit $7,000 today, how much will you have in the account in 5 years? In 10 years? In 20 years? 20. Calculating Loan Payments [LO2, 4] You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 5.8 percent for a 60-month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan? Ch. 7: Questions 1 & 2 (Concepts Review and Critial Thinking Questions section) and Questions 3, 9, &11 (Questions and Problems section) (Concepts Review and Critial Thinking Questions section) 1. Treasury Bonds [LO1] Is it true that a U.S. Treasury security is risk-free? 2. Interest Rate Risk [LO2] Which has greater interest rate risk, a 30-year Treasury bond or a 30year BB corporate bond? (Questions and Problems section) 3. Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond? 9. Zero Coupon Bonds [LO2] You find a zero coupon bond with a par value of $10,000 and 17 years to maturity. If the yield to maturity on this bond is 4.9 percent, what is the price of the bond? Assume semiannual compounding periods. 11. Valuing Bonds [LO2] Union Local School District has a bond outstanding with a coupon rate of 3.7 percent paid semiannually and 16 years to maturity. The yield to maturity on this bond is 3.9 percent, and the bond has a par value of $5,000. What is the price of the bond? Ch. 8: Questions 1 & 6 (Concepts Review and Critial Thinking Questions section) and Questions 1 & 6 (Questions and Problems section): Microsoft® Excel® template provided for Problem 6 (Concepts Review and Critial Thinking Questions section) 1. Stock Valuation [LO1] Why does the value of a share of stock depend on dividends? 6. Dividend Growth Model [LO1] Based on the dividend growth model, what are the two components of the total return on a share of stock? Which do you think is typically larger? (Questions and Problems section) 1. Stock Values [LO1] The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson–Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years? 6. Stock Valuation [LO1] Suppose you know that a company’s stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? Chapter 5 Problems 1, 2, 3, 4, 5 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel. To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK." Chapter 5 Question 3 Output area: $ $ $ $ Present value - Input area: Years Interest rate Future value Chapter 5 Question 4 Input area: Present value Output area: Years Interest rate #NUM! #NUM! #NUM! #NUM! Future value Chapter 8 Problems 4, 6, 7, 32 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel. To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK." Chapter 8 Question 6 Input area: Stock price Required return Output area: Next year's dividend $ - Current dividend $ -
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