**FIN 534 Homework Set 2 Answer**

FIN 534 Homework Set 2 Answer

1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at theend of Years 0 through 3? The appropriate interest rate is 10%, compounded annually2. We sometimes need to find out how long it will take a sum of money (or something else, such as earnings, population, or prices) to grow to some specified amount. For example, if a company’s sales are growing at a rate of 20% per year, how long will it take sales to double

3. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why?

4. What is the effective annual rate (EAR or EFF%) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?

5. 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?6 “A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is

10%.What would be the value of the bond described above if, just after it had been issued, the expected

inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?.”

7What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a

premium or a discount bond?

8. 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 rateIf the bond is selling at discount the yield to maturity will be greater than coupon rate and if the bond is selling at premium the yield to maturity will be less than coupon rate.

What are the total return, the current yield, and the capital gains yield for the discount bond

In Question #8 at $887.00?”“At $1,134.20?(Assume the bond is held to maturity and the company does

not default on the bond.)

For getting the instant digital download solution, Please click on the “PURCHASE” link below to get FIN 534 Homework Set 2 Answer

Please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link. Please note that in case of technical glitch, the solutions will be emailed to you within 24 hours.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@genietutorial.com