PS1 - a) Based on effective interest rates, in which bank...

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PS1 Fin 332 (1) Find the future value of the following annuity. The first payment in this annuity is made at the end of year 1; that is, it is an ordinary annuity. a) $400 per year for 10 years at 10 percent. b) Now rework part a assuming the payments are made at the beginning of each year; that is, it is an annuity due. (2) Find the present value of the following ordinary annuity. a) $400 per year for 10 years at 10 percent. b) Now rework part a assuming the payments are made at the beginning of each year; that is, it is an annuity due. (3) Universal Bank pays 7 percent interest, compounded annually, on time deposits. Regional Bank pays 6 percent interest, compounded quarterly.
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Unformatted text preview: a) Based on effective interest rates, in which bank would you prefer to deposit your money? (4) Washington-Pacific invests $4 million to clear a tract of land and to set out some young pine trees. The trees will mature in 10 years, at which time Washington-Pacific plans to sell the forest at an expected price of $8 million. What is Washington-Pacifics expected rate of return? (5) Your company is planning to borrow $1,000,000 on a 5-year, 15%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal?...
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This note was uploaded on 04/18/2008 for the course FIN 332 taught by Professor Dasilva during the Spring '08 term at CSU Fullerton.

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