MT1_ISE460_SP06_sol-1

# MT1_ISE460_SP06_sol-1 - month You pay off the whole balance...

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ISE 460 Spring 2006 GEZA BOTTLIK MIDTERM No. 1 Solution 02/22/06 Problem No. 1 (5 points each) a) A company produces and sells a product A (among many others). A sells for \$20.00, has a variable cost of \$5.00 and fixed initial costs of \$100,000. What is the breakeven volume? b) You want to withdraw the following amounts per year, starting a year from now: \$3,000, \$3,500, and \$5,000. How much do you have to deposit today if you can earn 3%, compounded annually? c) What is the effective rate of a 5% annual interest rate when it is compounded monthly? Page 1

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ISE 460 Spring 2006 GEZA BOTTLIK MIDTERM No. 1 Solution 02/22/06 Problem No. 2 Your credit card balance is \$1200 at the beginning of this month. The card company charges 12% APR, applied to the outstanding balance at the end of each month. How many payments will it take you to pay it off if you always pay 40% of the outstanding balance at the end of each

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Unformatted text preview: month? You pay off the whole balance when it drops below \$300. Also, how much is your last payment?(20 points) Page 2 ISE 460 Spring 2006 GEZA BOTTLIK MIDTERM No. 1 Solution 02/22/06 Problem No. 3 You are to receive \$500 in periods 4 and 5. How much do you have to deposit in periods 1,2, 3 to be equivalent at 10%? Assume that the deposits in periods 1, 2 and 3 are equal? (10 points) Page 3 ISE 460 Spring 2006 GEZA BOTTLIK MIDTERM No. 1 Solution 02/22/06 Problem No. 4 A new bond with a par value of \$10,000 and a 20 year maturity sold for \$9680 this week. The bond will pay \$225 semi annually. What is the bond’s yield to maturity to the nearest 1/8%? (20 points) The annual yield is therefore 4.675% Page 4...
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## This note was uploaded on 01/20/2009 for the course ISE 460 taught by Professor Bottlik during the Fall '06 term at USC.

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MT1_ISE460_SP06_sol-1 - month You pay off the whole balance...

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