Finance-valuation of bond,stock,tessury bills,-future value calculation

Feb 3rd, 2012
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i) What is the present value of $810 annuity payment over 4 years if interest rate is 8%? (Round to 2 decimal places) ii) Compute the future value in a year of $3,500 deposit in year 1 and another 3,000 deposit at the end of year 3 using a 10% interest rate. (Round to 2 decimal places) iii) One year treasury bills currently earn 2.80 percent. you expect I year from now a 1 year treasury bill rate to increase to 3.00 percent and that two year from now, 1 year treasury bill rates will I increase 3.50 percent. The liquidity premium on a 2 year security is 0.10 percent and on3-year securities are 0.20 percent. If the liquidity premium theory is correct what should the current rate be on 3-year treasury securities? (Round to 2 decimal places) iv) A particular security's risk default risk premium is 2 percent. The inflation risk premium is 1.90 percent and the real risk-free rate is 3.80 percent. The security's liquidity risk premium is 0.10 percent maturity risk premium is 0.70 percent. Calc

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i) What is the present value of $810 annuity payment over 4 years if interest rate is 8%? (Round to 2 decimal places)Answer: Given that,Annuity, A = $810Period, n = 4 Interest Rate, i = 8%Present Value, PV =?We know that PV = (A/i) [1-{1/ (1+i) n}] = ($810/.08) [1- {1/ (1.08)4}] = $2682.82ii) Compute the future value in a year of $3,500 deposit in year 1 and another 3,000 deposit at the end of year 3 using a 10% interest rate. (Round to 2 decimal places) Answer:Here one deposit is made in year 1 and another deposit is made in year 3. Assuming deposits are made

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