Finance

Max's Kennels spent $220,000 to refurbish its current facility. The firm borrowed 60 percent of the refurbishment cost at 5.95 percent interest for six years. What is the amount of each monthly payment?

$1,985.25 $2,205.36 $2,356.23 $2,184.51 Correct $1,895.32

Today, you are borrowing money and must repay the lender one year from now with a lump-sum payment of $12,800. How much money are you borrowing if the interest rate is 8.45 percent, compounded monthly?

$12,000.00 $10,550.00 $11,766.32 Correct $10,762.14 $11,802.67

Today, you are borrowing $18,200 to purchase a car. What will be your monthly payment if the loan is for three years at 7.0 percent interest?

$608.40 $621.50 $561.96 Correct $580.24 $600.10

Suppose your company needs to raise $65 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 4.9 percent, and you're evaluating two issue alternatives: a semiannual coupon bond with a coupon rate of 4.9 percent and a zero coupon bond. The tax rate is 21 percent. Both bonds will have a par value of $1,000. How many of the coupon bonds would you need to issue to raise the $65 million? How many of the zeroes would you need to issue? Note: Do not round intermediate calculations and enter your answers in bonds, not millions of bonds, rounded to the nearest whole number, e.g., 1,234,567. In 20 years, what will your company's repayment be if you issue the coupon bonds? What if you issue zeroes? Note: Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firm's aftertax cash outflows for the first year under the two different scenarios. Note: Enter a cash outflow as a negative value and a cash inflow as a positive value. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.

. Number of coupon bonds65,000selected answer correcta. Number of zero coupon bonds171,156selected answer correctb. Repayment of coupon bonds$66,592,500selected answer correctb. Repayment of zero coupon bonds$171,155,897selected answer correctc. Coupon bond cash flow$-2,516,150selected answer correctc. Zero coupon bond cash flow$677,043

Smiley Industrial Goods has $1,000 face value bonds on the market with semiannual interest payments, 13.5 years to maturity, and a market price of $1,023. At this price, the bonds yield 6.4 percent. What must be the coupon rate on these bonds?

3.33% 3.75% 7.33% 6.66% Correct 7.50%

You want to borrow $3,600 for 36 months and can afford monthly payments of $110, but no more. Assuming monthly compounding, what is the highest APR rate you can afford?

5.45% 5.84% 6.29% Correct 5.78% 6.68%

The 6.75 percent, $1,000 face value bonds of Mahalo Pineapples are currently selling at $989.50. These bonds have 12 years left until maturity. What is the current yield?

6.58% 6.82% Correct 6.75% 7.59% 7.62%

Beginning three months from now, you want to be able to withdraw $3,000 each quarter from your bank account to cover college expenses over the next four years. If the account pays .57 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next four years? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Amount needed$45,751.83

You are planning your retirement in 10 years. You currently have $60,000 in a bond account and $230,000 in a stock account. You plan to add $9,000 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 10.5 percent and the bond account will earn a return of 6 percent. When you retire, you plan to withdraw an equal amount for each of the next 25 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 5.3 percent. How much can you withdraw each year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Annual withdrawal amount$62,158.80

Union Local School District has bonds outstanding with a coupon rate of 2.9 percent paid semiannually and 16 years to maturity. The yield to maturity on these bonds is 2.7 percent and the bonds have a par value of $5,000. What is the dollar price of the bonds? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Bond price$5,129.23

You have just made your first $5,000 contribution to your retirement account. Assuming you earn a rate of return of 5 percent and make no additional contributions, what will your account be worth when you retire in 35 years? What if you wait for 5 years before contributing?

Multiple Choice $26,335.37; $23,011.60 $27,311.20; $29,803.04 $27,311.20; $22,614.08 $27,580.08; $21,609.71 Correct $31,241.90; $32,614.08

Western Bank pays 5 percent simple interest on its savings account balances, whereas Eastern Bank pays 5 percent compounded annually. If you deposited $6,000 in each bank, how much more money would you earn from the Eastern Bank account at the end of 3 years?

Multiple Choice $55.84 $45.75 Correct $60.47 $40.09 $50.14

Precision Engineering invested $95,000 at 5.5 percent interest, compounded annually for 2 years. How much interest did the company earn over this period of time?

Multiple Choice $95,000 $10,737.38-ans Correct $10,450.00 $10,931.36 $2,612.50

Stephen claims that he invested $2,200 six years ago and that this investment is worth $10,500 today. For this to be true, what annual rate of return did he have to earn? Assume the interest compounded annually.

Multiple Choice 29.76% Correct 31.39% 29.80% 26.01% 27.87%

Lisa has $1,000 in cash today. Which one of the following investment options is most apt to double her money?

Multiple Choice 6 percent interest for 3 years 12 percent interest for 5 years 7 percent interest for 9 years 8 percent interest for 9 years- ans

Solve for the unknown interest rate in each of the following: Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.

Present ValueYearsInterest RateFuture Value$18187.26selected answer correct%$317$335139.42selected answer correct%$1,080$48,0001113.07selected answer correct%$185,382$40,3532510.86selected answer correct%$531,618

Assume the appropriate discount rate for the following cash flows is 9.32 percent per year. YearCash Flow1$ 2,4802033,92042,170 What is the present value of the cash flows? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Present value$6,788.39

Say you own an asset that had a total return last year of 14.1 percent. If the inflation rate last year was 2.83 percent, what was your real return? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Real return 10.96%

Which one of the following statements is correct?

The APR is equal to the EAR for a loan that charges interest monthly. The EAR is always greater than the APR. The APR on a monthly loan is equal to (1 + monthly interest rate)12 − 1. The APR is the best measure of the actual rate you are paying on a loan. The EAR, rather than the APR, should be used to compare both investment and loan options.

What condition must exist if a bond's coupon rate is to equal both the bond's current yield and its yield to maturity? Assume the market rate of interest for this bond is positive.

The clean price of the bond must equal the bond's dirty price. The bond must be a zero-coupon bond and mature in exactly one year. The market price must exceed the par value by the value of one year's interest. The bond must be priced at par. Correct There is no condition under which this can occur.

Your coin collection contains fifty 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2067, assuming they appreciate at an annual rate of 4.3 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Value of collection$6,333.82

A Japanese company has a bond that sells for 96.318 percent of its ¥100,000 par value. The bond has a coupon rate of 3.4 percent paid annually and matures in 16 years. What is the yield to maturity of this bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Yield to maturity 3.71%

A local finance company quotes an interest rate of 18.4 percent on one-year loans. So, if you borrow $20,000, the interest for the year will be $3,680. Because you must repay a total of $23,680 in one year, the finance company requires you to pay $23,680/12, or $1,973.33 per month over the next 12 months. What rate would legally have to be quoted? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the effective annual rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

a. APR+/-1%32.39% b. EAR+/-1%37.66%

You have just made your first $5,500 contribution to your individual retirement account. Assume you earn an annual rate of return of 10 percent and make no additional contributions. What will your account be worth when you retire in 45 years? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What if you wait 10 years before contributing? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

a. Account value$400,897.66selected answer correct b. Account value$154,563.40

You have decided that you want to be a millionaire when you retire in 45 years. If you can earn an annual return of 11.8 percent, how much do you have to invest today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What if you can earn 5.9 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

a. Amount to invest$6,608.74 b. Amount to invest$75,802.20

In 1895, the first U.S. Open Golf Championship was held. The winner's prize money was $150. In 2020, the winner's check was $2.2 million. What was the annual percentage increase in the winner's check over this period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. If the winner's prize increases at the same rate, what will it be in 2050? Note: Do not round intermediate calculations and and enter your answer in dollars, not millons of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.

a. Annual percentage increase7.98 b. 2050 prize money$21,995,924.59

Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 18 years to maturity, make semiannual payments, and a YTM of 6 percent. The par value is $1,000. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.

a. Bond J-21.59selected answer correct%a. Bond K-17.55selected answer correct%b. Bond J29.74selected answer correct%b. Bond K23.33selected answer correct%

When a bond's yield to maturity is less than the bond's coupon rate, the bond:

had to be recently issued. is selling at a premium. Correct has reached its maturity date. is priced at par. is selling at a discount.

Consider the following cash flows: YearCash Flow2$ 20,000327,000538,000 Assume an interest rate of 5.7 percent per year. If today is Year 0, what is the future value of the cash flows five years from now? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. If today is Year 0, what is the future value of the cash flows ten years from now? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

a. Future value$91,784.37 b. Future value$121,099.86

Last year, Forest Products issued both 5-year and 10-year bonds at par. The bonds each have a coupon rate of 5.5 percent, paid semiannually, and a face value of $1,000. Assume the yield to maturity on each of these bonds is now 7.4 percent. What is the percentage change in the price of the 5-year bond since it was issued? The 10-year bond?

−3.39%; −6.08% −6.08%; −6.33% −6.48%; -12.33% Correct −6.48%; −10.87% −3.39%; −5.77%