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Homework answers / question archive / What is the annual payments (rounded to nearest dollar) you need to make to fully amortise a 20-year, $250,000 mortgage on a building at a 6% interest rate
What is the annual payments (rounded to nearest dollar) you need to make to fully amortise a 20-year, $250,000 mortgage on a building at a 6% interest rate. Assume that payments are made at the end of each year,
Select one:
a.
$17 500
b.
$24 815
c.
$18 630
d.
$21 796
ConsGrough, Inc. has increased its annual ordinary dividend by 4% in each of the years that the company has existed. If you believe that the company can continue to do so indefinitely, then what price would you be willing to pay for ConsGrough if the required rate of return is 7% and the expected dividend next year is $6.24?
Select one:
a.
$214.00
b.
$171.67
c.
$208.00
d.
$166.67
Over the last three years you have earned 5%, 7% and 9% on your portfolio, calculate the standard deviation of the returns of that portfolio.
Select one:
a.
0.02
b.
0.07
c.
0.04
d.
0.0004
Security A has a beta of 1.3, the risk-free rate is 4%, and the expected return on the market is 11%, calculate the expected return for Security A.
Select one:
a.
13.1%
b.
18.3%
c.
14.6%
d.
15.0%
$1000 is invested for 12 months at a nominal rate of 12%. What is the accumulated value if interest is compounded monthly?
Select one:
a.
$1,123.6
b.
$1,126.83
c.
$1,120.00
d.
1010.00
What is the present value of $30 to be received at the beginning of each year for the next five years if the discount rate is 11%?
Select one:
a.
$126.63
b.
$123.08
c.
$125.00
d.
$115.12
A 10-year bond pays interest annually. Its par value is $1,000 and its coupon rate equals 5%. If the market's required return on the bond is 6 per cent, what is the bond's market price?
Select one:
a.
$926.00
b.
$1020.10
c.
$862.35
d.
$952.76
You plan to deposit $2,000 annually, at the end of each of the next five years, into a savings account paying 4 percent annual interest. What is the future value (FV) of this (ordinary) annuity?
Select one:
a.
$12,000
b.
$10,434
c.
$10,832
d.
$11,265
1) Computation of Annual Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Annual Payment = ?
Rate = 6%
Nper = 20 years
PV = $250,000
FV = 0
Substituting the values in formula:
=pmt(6%,20,-250000,0)
PMT or Annual Payment = $21,796.14 or $21,796
So, the correct option is D "$21,796".
2) Computation of Current Stock Price for ConsGrough:
Current Stock Price = Next Year Expected Dividend / (Required Rate of Return - Growth Rate)
= $6.24/(7%-4%)
= $6.24/3%
Current Stock Price = $208
So, the correct option is C "$208.00".
3) Computation of Standard Deviation:
Average Returns = Total Returns/Total Time Period
= (5%+7%+9%)/3
Average Return (Mean) = 7%
| Return | (Return-Mean)^2 |
| 5% | 0.040% |
| 7% | 0.000% |
| 9% | 0.040% |
| 0.080% |
Standard Deviation = [Total (Return-Mean)^2/(Time Period-1)]^(1/2)
=[0.080%/(3-1)]^(1/2)
=0.0004^(1/2)
Standard Deviation = 2%
So, the correct option is A "0.02 or 2%".
4) Computation of Expected Return for Security A:
Expected Return for Security A = Risk-free Rate+Beta*Market Risk Premium
Expected Return for Security A = Risk-free Rate+Beta*(Expected Return on the Market-Risk-free Rate)
= 4% + 1.3*(11%-4%)
= 4% + 1.3*7%
= 4% + 9.1%
Expected Return for Security A = 13.1%
So, the correct option is A "13.1%".
5) Calculation of Accumulate Value or Amount:
Amount = Principal*(1+Interest Rate/Number of Periods)^Number of Periods
= $1,000*(1+12%/12)^12
= $1,000*1.1268
Amount = $1,126.83
So, the correct option is B "$1,126.83".
6) Computation of Present Value using PV Function in Excel:
=-pv(rate,nper,pmt,fv,type)
Here,
PV = Present Value = ?
Rate = 11%
Nper = 5 years
PMT = $30
FV = 0
Type = 1 (at the beginning)
Substituting the values in formula:
=-pv(11%,5,30,0,1)
PV or Present Value = $123.08
So, the correct option is B "$123.08".
7) Computation of Bond's Market Price using PV Function in Excel:
=-pv(rate,nper,pmt,fv,type)
Here,
PV = Bond's Market Price = ?
Rate = 6%
Nper = 10 years
PMT = $1,000*5% = $50
FV = $1,000
Type = 0
Substituting the values in formula:
=-pv(6%,10,50,1000,0)
PV or Present Value = $926.40
So, the correct option is A "$926.00". The difference is due to rounding off figure.
8) Computation of Future Value of Ordinary Annuity using FV Function in Excel:
=fv(rate,nper,-pmt,pv)
Here,
FV = Future Value of Ordinary Annuity = ?
Rate = 4%
Nper = 5 years
PMT = $2,000
PV = 0
Substituting the values in formula:
=fv(4%,5,-2000,0)
FV or Future Value of Ordinary Annuity = $10,832.65 or $10,832
So, the correct option is C "$10,832".
