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1

Finance

1.

  1. From an insurance company you would like to receive Tk 5000 at the end of each year for 4 years. How much money you have to deposit now at 12% interest rate for receiving such amount?
  2. Mr. Hakim retires from his job and receives a lump sum amount from his employer. He wants to receive Tk. 100,000 at the end of each year for the next 10 years. If the interest rate is 5% then how much he has to deposit for receiving such series of cash inflows.
  3. Mr. Basher receives some money from his friend. He committed to repay the money at the beginning of each year for 10 years by Tk. 6000. If he makes a payment in this way total principle and interest will be repaid. If the interest rate is 6% then how much money he takes from his friend.
  4. A Company has decided to set up a sinking fund to replace an asset after 5 years. The value of the fund after 5 years must be Tk. 1,00,000 and the fund is expected to earn interest at the rate of 7% per annum. i) What must be the annual payment into the fund if the payment makes at the end of each year?
  5. What is the present value of Tk. 4000 receiving at the beginning of each year for 7 years at a 10% interest rate?

2.

 The Security market line

1) is defined as the slope of a line relating an individual security's system to the return of other securities in that firms primary industry

2) provides a picture of the risk return tradeoff required by diversified investors considering various risky assets

3) is determined by the prevailing level of risk free interest rates minus a risk premium

4) has as its slope the beta of the security

3. You take out a $7,100 car loan that calls for 36 monthly payments starting after 1 month at an APR of 9%. a. What is your monthly payment? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Monthly payment $ 225.78 b. What is the effective annual interest rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Effective annual interest rate 9.41 % c. Now assume the payments are made in four annual year-end installments. What annual payment would have the same present value as the monthly payment you calculated? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Annual payment

4.A zero coupon bond is a bond that

1) has a high current yield

2) is a premium value bond

3) originally sold at a discount

4) will sell for a premium

5. The company had relatively few shareholders and had no obligation to report its financial results to the public or to regulators such as the Securities and Exchange Commission (SEC), which allowed co-founder Mark Zuckerberg to focus his energy on building Facebook's rapidly growing business. Just 6 years after its inception in Zuckerberg's Harvard dorm room, Facebook's user base surpassed the 500 million mark, and pressure mounted on Zuckerberg to take the company public" via an initial public offering (IPO) of common stock. Such a move would allow Facebook's early investors to cash out and would make dozens of Facebook's employees rich, none more so than Zuckerberg himself. On May 18, 2012, Facebook launched its IPO by selling 421 million shares at a price of $38 per share. Almost immediately the price of Facebook stock rose as high as $45 per share, but there were signs of trouble. Technical problems on the NASDAQ stock exchange caused millions of orders for Facebook shares to be wrongly placed. Even worse, during the first month after Facebook's IPO, its share price fell to $30. Investors filed dozens of lawsuits, alleging that they were harmed not only by NASDAQ's trading glitches, but also by the selective release of unfavorable financial information by Facebook's investment bankers and its senior managers. Once firms "go public" by selling shares to the public, they face a host of new pressures that private companies do not, so why do they go public at all? Often it is to provide an exit strategy for private investors, gain access to investment capital, establish a market price for the firm's shares, gain public exposure, or all those reasons. Going public helps firms grow, but that and other benefits of public ownership must be weighed against the costs of doing so. A public firm's managers work for and are responsible to the firm's investors, and government regulations require firms to provide investors with frequent reports disclosing material information about the firm's performance. The regulatory demands placed on managers of public firms can sometimes distract managers from important aspects of running their businesses. This chapter will highlight the trade- offs faced by financial managers as they make decisions intended to maximize the value of their firms. 1. What was the percentage drop in Facebook shares in its first year as a public company? 2. Just after the IPO, Facebook's CEO, Mark Zuckerberg, owned 443 million shares. What was the total value of his Facebook stock immediately after the IPO and then again one year later? How much wealth did Zuckerberg personally lose over the year?

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