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Get college assignment help at uniessay writers 3-Defre “Forfatr aud frct the “Cosof fihng explam the Factors which

5 pts Question 12 Jim sold a car and accepted a note promising cash flows of $1,000 at the end of Year 1. and $2,000 at the end of Years 2, 3, and 4 as his payment. What was the effective price he received for the car, assuming an interest rate of 6.90%? Your answer should be between 4,715.00 and 6,525.00, rounded to 2 decimal places, with no special characters. Question 13 5 pts Bill paid $10,000 (at CFO) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $12,350 at the end of the 5th year. What is the expected rate of return on this investment? Your answer should be between 8.12 and 21.96, rounded to 2 decimal places, with no special characters.

On February 4, 2017, Roger paid $41,000 (including sales tax) for an Infiniti crossover SUV (gross weight under 6,000 pounds). No trade-in was involved, and he did not claim any § 179 expense Under the actual operating cost method, he depreciates the SUV using MACRS. (Hint: See Table 3 in the instructions to Form 4562.) His operating expenses for the Infiniti for 2018 are as or bonus depreciation on the cost last year follows: ei orrnbb nl io Gasoline $3,300 Auto insurance 1,600 240 Repairs benip bod cl rtos 180 Auto club dues 120 Oil changes and lubrication License and registration 60 Roger drove the Infiniti a total of 14,500 miles during 2018, 13,050 of which were driven for business purposes. During business use, Roger received three moving traffic violations for which he paid $680 in fines. He also incurred tolls and parking charges of $440.

5 pts Question 14 Chelsea is buying her first condo for $200,000, and will make a $15,000 down payment. She has arranged to finance the remainder with a 30-year mortgage at a 4.75% nominal interest rate. This amortized loan has monthly payments, with the first payment due in one month. What will her monthly payments be? Your answer should be between 526.00 and 1462.20, rounded to 2 decimal places, with no special characters Question 15 5 pts asset for $4,500 that is expected to produce cash You are offered a chance to buy an flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $4,550 at the end of Year 4. What rate of return would you earn if you bought this asset? Your answer should be between 5.08 and 22.48, rounded to 2 decimal places, special characters. with no

5 pts Question 18 An investment promises the following cash flow stream: $1,000 at Time 0; $2,000 at the end of Year 1 (or att = 1); $3,000 at the end of Year 2:; and $5,000 at the end of Year 3. At a discount rate of 6.5 %, what is the present value of the cash flow stream? Your answer should be between 8343.00 and 11,000.00, rounded to 2 decimal places, with no special characters Question 19 5 pts Consider a 30-year, $115,000 fixed-rate mortgage with a nominal annual rate of 5.35 percent. All payments are made at the end of each month. What is the remaining balance on the mortgage after 5 years? Your answer should be between 98,478 and 112,670, rounded to 2 decimal places, with no special characters.

5 pts Question 20 Ashley turned 30 today, and she is planning to save $3,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund, which she expects to provide a return of 9.50% per year throughout her lifetime. She plans to retire 35 years from today, when she turns 65, and she expects to live for 30 years after retirement, to age 95. Under these assumptions, how much can she spend in each year after she retires? Her first withdrawal will be made at the end of her first retirement year, and she plans on leaving no money to her heirs. Your answer should be between 28,800.00 and 95,225.00, rounded to 2 decimal places, with no special characters.

AAAS4A Scoopy-Doo Pet Foods prices its pet food to maintain a 45% 37. margin. A 7-kg. bag of Woof-Woof dog food costs $27.50. Calculate the selling price. CK Winery sells its merlot red wine for $21.00. If the rate of markup is 200%, what did the wine cost the retailer? What is the percent margin? 38. If you knew that an appliance dealer makes $100 on the sale of a certain model of washing machine and the dealer has a markup policy of 20% of cost, how much did this washer cost the dealer? What is the selling price of the washer? Find the percent margin. 39.

Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a 12% coupon interest rate. The issue pays interest annually and has 11 years remaining to its maturity date. If bonds of similar risk are currently earning a rate of return of 9%, how much should the Complex Systems bond sell for today? b. Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond. f the required return were at 12% instead of 9%, what would the current value of Complex Systems’ bond be? Contrast this finding with your findings in part a and discuss a C. . (Round to the nearest cent.) f bonds of similar risk are currently earning a rate of return of 9%, the Complex Systems bond should sell today for a. b. Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond. (Select the best answer below.) A. Since Complex Systems’ bonds were issued, there may have been a shift in the supply-demand relationship for money or a change in the risk towards the firm B. Since Complex Systems’ bonds were issued, there may have been a change in the supply-demand relationship for money or a shift in the investors’ attitudes towards the firm. O C. Since Complex Systems’ bonds were issued, there may have been a shift in the supply-demand relationship for their product or a change in the risk towards loans. D. Since Complex Systems’ bonds were issued, there may have been a change in the number of bonds available or a change in the coupon interest rate. f the required return were at 12% instead of 9%, the current value of Complex Systems’ bond would be $ (Round to the nearest cent.) C. the par value. In contrast in part a above, if the required return is less than the When the required return is equal to the coupon rate, the bond value is (its value will be greater than par). (Select the best answers from the drop-down menus.) coupon rate, the bond will sell at a

5. If an investor paid a $4.75 premium to obtain a long position in a put option with an exercise price of $47, the underlying asset break-even point corresponds to what price? Diagram the position

1. Which has unlimited downside risk, a long or short position in a call option? What about a long or short position in a put option? Explain your answers.

Get college assignment help at uniessay writers 15. What is the minimum-risk (standard deviation) portfolio of AT

QUESTION 1 (6 marks) Deposits of $1000 are made into an investment fund at t = 0 and r 1. The fund balance is $1200 just before the deposit at t= 1, and $2200 at 2 (a) [2 marks] Calculate the money-weighted rate of return (MWRR) over the two year period. Express your answer as an effective rate per annum. (b) [2 marks] Calculate the time-weighted rate of return (TWRR) over the two year period. Express your answer as an effective rate per annum. (c) [2 marks] Compare your answers in parts (a) and (b). Is your MWRR greater than, less than, or approximately equal to your TWRR? Provide a written explanation for the relationship between the MWRR and TWRR values you calculated.

QUESTION 3 (13 marks) The annual force of interest, 5(t). is a function of time. At any time 1, measured in years, it is given by the formula 0.04 0.02e 00 0SI<20 0.04 12 20 (a) [5 marks] Derive and simplify as far as possible expressions for the present value at time 0 of $1 due at time t. We require two different expressions, one for 0 st <20 and one for t 2 20. (b) [1 mark] What is the present value at time zero of $1,000 due at the end of 23 years? (c) [3 marks] Calculate the constant nominal annual discount rate compounded half-yearly which would give the same answer to the question posed in (b). (d) [4 marks] A continuous payment stream is received between t 25 and r 30. Within this range, the rate of payment at time r is ($200 $25t) p.a. Calculate the accumulated value of the payment stream at time r #30.

QUESTION 8 (16 marks) (a) [5 marks] John purchases a $1000 face value 10-year bond with coupons of 8% per annum paid half-yearly. The bond will be redeemed at C. The purchase price is $800 and the exact present value of the redemption amount C is $301.5116. Calculate the redemption amount C, and state if the bond is redeemed at par, discount or premium. (Hint: a at 3% is 14.87747 ag at 4% is 13.59033, a at 5 % is 12.46221 and a at 6% is 11.46992) (b) [6 marks] Tony is considering to purchase a $1000 face value callable bond (the bond can be redeemed at any time during the agreed callable period). The bond pays coupons of 10% per annum half-yearly and matures at the end of 10 years, if not called. The bond is callable at the following periods for the following redemption amounts: C 1050; ends of years 4-6 C-900; ends of years 8-10. Find the minimum price that Tony annum convertible half-yearly. (Hint: you may find it helpful by trying to find the impact of redemption time on bond price first, given different values of C) can offer and still be certain of a yield rate of 10% per (c) [5 marks] Simon purchases a $1000 face value 10-year bond with 8% per annum half-yearly paid coupons. He can reinvest those coupons at a nominal rate of 6% per annum convertible half-yearly. The bond is redeemed at par. Coupon payments are taxed at 20%. Capital gains are taxed at 30%. There is no additional tax on reinvestment proceeds. Find the price Simon should pay for the bond to ear a yield of 8% per annum convertible half-yearly.

QUESTION 7 (16 marks) A 10-year indexed bond is issued on 15/5/2008 with a face value of $1,100. It pays quarterly coupons and the real coupon rate is 3% p.a. Assume that all months are of equal length After allowing for any lag inherent in the indexing process, the CPI relevant to the quarter in which the bond was issued was 212.0, and the CPI relevant to the quarter containing 15/5/2012 was 248.7. (a) [2 marks] Determine the indexed capital at 15/5/2012 rounded to the nearest cent. Use this rounded value in all subsequent parts of this question. (b) [2 mark] State the size of the coupon due at 15/5/2012 Bob purchased of $990. Bob expects future inflation to be 2.5% p.a. effective. one of the bonds on 15/5/2012 immediately after the coupon then due at a price (c) [5 marks] Provide an equation of value which could be solved to determine Bob’s real yield, expressed as an effective quarterly rate. Ignore tax. (d) [4.5 marks] Use linear interpolation to estimate the solution to your equation from (c). (e) [2.5 marks] Without performing any further calculations, explain in which direction your answer to (d) would move if the CPI for the quarter containing 15/5/2012 had been higher than 248.7.

QUESTION 6 (8 marks) The government issued 10-year bonds on 1/1/2005. The bonds have a face value of $110 and mature at par on 1/1/2015. They pay half-yearly coupons at 7% p.a. On 1/10/2011 Ann and Bob entered into a forward contract under which Ann agreed to sell Bob one of the above bonds on 1/9/2012 at a price of $99. Assume all months are of equal length. (a) [3 marks] Write down an equation to determine the underlying flat annual effective yield (b) [5 marks] Calculate the value of this forward contract for Bob on 1/1/2012, given that at that date the yield curve is flat at 5 % p.a.

QUESTION 3 (13 marks) The annual force of interest, 5(), is a function of time. At any time r, measured in years, it is given by the formula 6t) = 0.04 0.02e 00 0.04 0S1 20 r2 20 (a) [5 marks] Derive and simplify as far as possible expressions for the present value at time 0 of $1 due at time t. We require two different expressions, one for 0 st < 20 and one for t 2 20. (b) [I mark] What is the present value at time zero of $1,000 due at the end of 23 years? (c) [3 marks] Calculate the constant nominal annual discount rate compounded half-yearly which would give the same answer to the question posed in (b). (d) [4 marks] A continuous payment stream is received between t 25 and t 30. Within this range, the rate of payment at time is ($200 $25) p.a. Calculate the accumulated value of the payment stream at time r 30.

E) 40.00% 14. Consider a value-weighted market index that includes the two companies shown in the table. What is the percentage change in the index from Day 1 to Day 27 Company 1 Company 1 Company 2 Company Price Day #of Shares # of Shares 1,500 1,500 Price 1 $7.00 $7.24 400 $10.00 $10.53 2 400 A) 4.00% B) 4.25% C) 4.50% D) 4.75% E) 5.00% 15. Consider a value-weighted market index that includes the following two companies. On Day 1 you form a portfolio to mimic the index. (In other words, to earn the same return as the index.) Company 1 Company 1 Company 2 of Shares Company 2 # of Shares Price Day Price $10.00 750 $6.62 200 1 $10.54 750 200 $7.24 2 What is the portfolio weight on Company 1, and what is the return on the portfolio from Day 1 to Day 2? (Weight %, Return %) A) 14%, 5% B) 14%, 6% C) 15%, 6% D) 15%, 7%

D) All th 39. If capital markets are efficient, then A) there is no reason to believe that prices B) it is not possible to make money by playing the stock market. C) prices will adjust slowly when reacting to new information. D) historical price trends will give you a good idea of where prices are headed in the future. Eyit is possible to profit regularly from publicly available information. are too high or too low 40. Which of the following statements is FALSE? A) Market prices for assets are influenced by buyers who can derive the most value from them. B) Asset markets ensure that the price of an asset is the highest price C) Buyers with the most information about an asset are likely to increase its value. D) Market participants, bidding against each other, establish the market price for assets. E) Buyers who are uncertain about the future returns from an asset require a higher return than better informed investors an asset can command

29. Consider the two assets outlined in the table below, What is the beta of the two asset portfolio given that 40% is invested in X? Asset Expected Return Beta X 12% 0.40 Risk Free 5% A) 0.026 B) 0.085 C) 0.160 D) 0.190 E) 0.220

9. Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate 2) A zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity A. Bond X because of the higher yield to maturity B. Bond X because of the longer time to maturity. C. Bond Y because of the longer duration D. Both have the same sensitivity because both have the same yield to maturity. E. None of these is correct.

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November 3, 2019