Corporate Finance, Chapters 5 & 6. Exam Questions:
- What is the future value of $10,000 on deposit for 5 years at 6% simple interest? $13,000.00
- What will be the approximate population of the United States, if its current population of 300 million grows at a compound rate of 2% annually for 25 years? 492 million
- What is the discount factor for $1 to be received in 5 years at a discount rate of 8%? .6806
- Assume the total expense for your current year in college equals $20,000. Approximately how much would your parents have needed to invest 21 years ago in an account paying 8% compounded annually to cover this amount? $3,973.00
- What is the present value of your trust fund if it promises to pay you $50,000 on your 30th birthday (7 years from today) and earns 10% compounded annually? $25,657.91
- How much more would you be willing to pay today for an investment offering $10,000 in 4 years rather than the normally advertised 5-year period? Your discount rate is 8%. $544.47
- What will be the monthly payment on a home mortgage of $75,000 at 12% interest, to be amortized over 30 years? $771.46
- Approximately how much should be accumulated by the beginning of retirement to provide a $2,500 monthly check that will last for 25 years, during which time the fund will earn 8% interest with monthly compounding? $323,800.00
- Your retirement account has a current balance of $50,000. What interest rate would need to be earned in order to accumulate a total of $1,000,000 in 30 years, by adding $6,000 annually? 7.24%
- “Give me $5,000 today and I’ll return $20,000 to you in 5 years,” offers the investment broker. To the nearest percent, what annual interest rate is being offered? 32%
- How much does the $1,000 to be received upon a bond’s maturity in 4 years add to the bond’s price if the appropriate discount rate is 6%? $792.09
- How much should you pay for a $1,000 bond with 10% coupon, annual payments, and 5 years to maturity if the interest rate is 12%? $927.90
- How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 5 years if the interest rate is 7%? $1,082.00
- What is the current yield of a bond with a 6% coupon, 4 years until maturity, and a price of $750? 8.0%
- What is the coupon rate for a bond with 3 years until maturity, a price of $1,053.46, and a yield to maturity of 6%? 8%
- What is the yield to maturity for a bond paying $100 annually that has 6 years until maturity and sells for $1,000? 10.0%
- If a 4-year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90, how much will it be worth 1 year from now if interest rates are constant? $925.39
- What is the yield to maturity of a bond with the following characteristics? Coupon rate is 8% with semiannual payments, current price is $960, 3 years until maturity. 9.57%
- Two years ago bonds were issued with 10 years until maturity, selling at par, and a 7% coupon. If interest rates for that grade of bond are currently 8.25%, what will be the market price of these bonds? $928.84
- How much should you be prepared to pay for a 10-year bond with a 6% coupon and a yield to maturity of 7.5%? $897.04
