1. Calculate the present value of an investment given the following information: (a) Years—20, (b) Rate—10%, and (c) Future Value—$20,000.
2. Calculate the future value of an investment given the following information: (a) Years—10, (b) Rate—5%, and (c) Present Value—$10,000.
3. Calculate the rate of return on an investment given the following information: (a) Years—25, (b) Present Value—$50,000, (c) Future Value—$400,000.
4. Calculate the number of years on an investment given the following information: (a) Present Value—$32,000, (b) Future Value—$165,000, and Rate—12%.
5. Calculate the present value of an annuity given the following information: (a) Years—10, (b) Payment—$15,000, and Rate—15%.
6. Calculate the future value of an annuity given the following information: (a) Years—25, (b) Payments--$25,000, and (c) Rate—4%.
7. Calculate the rate of return for the following annuity: (a) Present Value—$24,000, (b) Number of Years—10, Payments $2,600.
8. Calculate the present value of an ordinary annuity with the following characteristics: (a) Payment—$10,000, (b) Number of Years—10, and (c) Rate—10%.
9. Calculate the current price of a bond that has the following characteristic: (a) Coupon--$85, (b) Yield to Maturity—5%, and Number of Years—10.
10. Calculate the current price of a bond that pays semi-annual coupon payments and has the following characteristics: (a) Number of Years until maturity—20, (b) Annual Coupon Rate—4%, and (c) Yield to Maturity—5%.
11. Calculate the yield to maturity for a bond that has the following characteristics: (a) Coupon--$50, (b) Price--$1,080, and (c) Years until Maturity—20.
12. Calculate the price that you would be willing to pay for the following ‘no growth’ stock that has the following characteristics: (a) Annual Dividend--$2.50 and (b) Investor’s required rate of return—10%.
13. Calculate the price that you would be willing to pay for the following ‘constant growth’ stock that has the following characteristics: (a) Annual Dividend—$2.50, (b) Constant Growth Rate—8%, and (c) Investor’s required rate of return—10%.
Sure! I'll explain how to get the answer for each question:
1. To calculate the present value of an investment, you can use the present value formula: Present Value = Future Value / (1 + Rate)^Years. In this case, the Future Value is $20,000, the Rate is 10%, and the Years is 20.
2. To calculate the future value of an investment, you can use the future value formula: Future Value = Present Value * (1 + Rate)^Years. In this case, the Present Value is $10,000, the Rate is 5%, and the Years is 10.
3. To calculate the rate of return on an investment, you can use the rate of return formula: Rate of Return = (Future Value / Present Value)^(1/Years) - 1. In this case, the Present Value is $50,000, the Future Value is $400,000, and the Years is 25.
4. To calculate the number of years on an investment, you can use the number of years formula: Years = log(Future Value / Present Value) / log(1 + Rate). In this case, the Present Value is $32,000, the Future Value is $165,000, and the Rate is 12%.
5. To calculate the present value of an annuity, you can use the present value of annuity formula: Present Value = Payment * (1 - (1 + Rate)^(-Years)) / Rate. In this case, the Payment is $15,000, the Rate is 15%, and the Years is 10.
6. To calculate the future value of an annuity, you can use the future value of annuity formula: Future Value = Payment * ((1 + Rate)^Years - 1) / Rate. In this case, the Payment is $25,000, the Rate is 4%, and the Years is 25.
7. To calculate the rate of return for an annuity, you can use the rate of return on annuity formula: Rate of Return = (Total Payments / Present Value)^(1/Years) - 1. In this case, the Present Value is $24,000, the Payments are $2,600, and the Number of Years is 10.
8. To calculate the present value of an ordinary annuity, you can use the present value of ordinary annuity formula: Present Value = Payment * (1 - (1 + Rate)^(-Years)) / Rate. In this case, the Payment is $10,000, the Number of Years is 10, and the Rate is 10%.
9. To calculate the current price of a bond, you can use the present value of bond formula: Current Price = (Coupon / Yield to Maturity) * (1 - (1 + Yield to Maturity)^(-Years)) + (Face Value / (1 + Yield to Maturity)^Years). In this case, the Coupon is $85, the Yield to Maturity is 5%, and the Number of Years is 10.
10. To calculate the current price of a bond with semi-annual coupon payments, you can divide the coupon rate and yield to maturity by 2, and double the number of years. Then you can use the same present value of bond formula as in question 9.
11. To calculate the yield to maturity for a bond, you can use the yield to maturity formula: Yield to Maturity = (Coupon + ((Face Value - Price) / Years)) / ((Face Value + Price) / 2). In this case, the Coupon is $50, the Price is $1,080, and the Years until Maturity is 20.
12. To calculate the price you would be willing to pay for a 'no growth' stock, you can use the dividend discount model formula: Price = Dividend / Required Rate of Return. In this case, the Annual Dividend is $2.50 and the Required Rate of Return is 10%.
13. To calculate the price you would be willing to pay for a 'constant growth' stock, you can use the constant growth dividend discount model formula: Price = Dividend / (Required Rate of Return - Growth Rate). In this case, the Annual Dividend is $2.50, the Required Rate of Return is 10%, and the Growth Rate is 8%.