Finance 534

Finance 534

Directions: Answer the following questions on a separate
document. Explain how you reached the answer or show your work if a
mathematical calculation is needed, or both. Submit your assignment
using the assignment link in the course shell. This homework
assignment is worth 100 points. Assume that you are nearing
graduation and have applied for a job with a local bank. The bank’s
evaluation process requires you to take an examination that covers
several financial analysis techniques. Use the following
information for Questions 1 through 2: 1. What is the present value
of the following uneven cash flow stream −$50, $100, $75, and $50
at the end of Years 0 through 3? The appropriate interest rate is
10%, compounded annually. 2. Suppose that on January 1 you deposit
$100 in an account that pays a nominal (or quoted) interest rate of
11.33463%, with interest added (compounded) daily. How much will
you have in your account on October 1, or 9 months later? Use the
following information for Questions 3 and 4: A firm issues a
10-year, $1,000 par value bond with a 10% annual coupon and a
required rate of return is 10%. 3. What is the yield to maturity on
a 10-year, 9% annual coupon, $1,000 par value bond that sells for
$887.00? That sells for $1,134.20? What does a bond selling at a
discount or at a premium tell you about the relationship between rd
and the bond’s coupon rate? 4. What are the total return, the
current yield, and the capital gains yield for the discount bond in
Question #3 at $887.00? At $1,134.20? (Assume the bond is held to
maturity and the company does not default on the bond.)

 

 

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