Chapters 11,12 Homework Solutions

# Chapters 11,12 Homework Solutions - Chapter 11 HW(5 7 9 11...

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Chapter 11 HW (5, 7, 9, 11) 5) Terms Value FV ?? PV \$7,840.00 Days 182 Investment R 0.04093 7) Terms Value FV \$8,000.00 PV \$7,930.00 Days (Investment) ?? Days (Discount) ?? Investment R 0.04 Discount R 0.04 9) Terms Value FV \$200,000.00 PV (51 Days) ??? PV (71 Days) ??? Days (1) 51 Days (2) 71 Investment R 0.0375 11) Bidder Price Bidder Price 1 \$500.00 0.994 \$2,100.00 2 \$750.00 0.9901 1 0.994 \$500.00 \$1,600.00 3 \$1,500.00 0.9925 5 0.9939 \$600.00 \$1,000.00 4 \$1,000.00 0.9936 4 0.9936 \$1,000.00 \$- 5 \$600.00 0.9939 Amount In Millions Amount In Millions Amount Left After Purchase The price of 182 day commercial paper is \$7,840. If the annualized investment rate is 4.093%, what will the paper pay at maturty (FV)? IMPORTANT NOTE REGARDING THIS CHAPTER Annualized Discount Rate Formula [ (FV-PV) / FV ] * (360/Days) = R Annualized Investment Rate Formula [ (FV-PV) / PV ] * (365/Days) = R Read the problem and make sure you know which rate the problem is asking for. The key difference between the two equations is that 1. They # of days in a year is different and 2. What you divide the first expression by. [ (FV-7840) / 7840 ] * (365/182) = 0.04093 [ (FV -7840) / 7840 ] * 2.0055 = 0.04093 [ (FV-7840) / 7840 ] = 0.0204 FV - 7840 = 160.0056 FV = 8,000.01 The price of \$8,000 face value commercial paper is \$7,930.

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