Chapter 4: Q4BPd (page 282)
Question: You will receive \(6,800 three years from now. The discount rate is 10 percent. d. Use the formula PV 5 FV 3 _____ 1 (1 1 i) n to find the present value of \)6,600 received three years from now at 10 percent interest.
Answer
The present value is $4,958.68.
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If you invest $8,500 per period for the following number of periods, how much would you have? a. 12 years at 10 percent.
What are the three adjustments that have to be made in going from annual to semi-annual bond analysis?
North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 6 percent to 14 percent (yield is the same as required rate of return).
a. What was the original issue price?
b. What is the current value of this preferred stock?
c. If the yield on the Standard & Poor’s Preferred Stock Index declines, how will the price of the preferred stock be affected?
How is the future value related to the present value of a single sum?
Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 15 percent annual interest. The current yield to maturity on such bonds in the market is 17 percent. Compute the price of the bonds for these maturity dates:
a. 30 years.
b. 20 years.
c. 4 years.
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