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Unformatted text preview: BUS 420
Financia! Management of COrporations
Homework Assignment  Chapter 4 Work the foliowing problems and show the calculator keystrokes needed to solve each probiem. 1. What is the most you should be willing to pay today for the right to receive $1 million 20 years from
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today Ifyou can eam a 12/o annual rate of return, compounded annually? '9‘ \l q}. t P St I‘M l t] V/Y t: meat out “@1414,me
1.900.000 4p. F‘v’ 10 33 ll '31»! \{K 2. You live in Russia. You are saving to buy a new digital camera. Your bank pays 12% annual interest,
compounded annually. You estimate that two years from now, 12,000 rubles should sufﬁce for a
camera with good resolution. If you put 5,000 rubles into the account immediater and 5,500 mbles at
yearend will on be able to bu the mere two KTV of" "in/co \u—M gum/‘5‘ 124329 E El WW 122321,: 1 amp
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PV PK} 75:16:: 3. You live in Russia. You want to know w e e'r you have saved enough money to let yot‘lr ‘
engineering at North Carolina State Universi in America for two years starting ﬁve years from no .
You estimate you will need 240,000 rubles ﬁve years from today and 275,000 rubles six years f a'
today. You can invest money today to earn 20% annual intemst, compounded annually. Wh
amount of savings invested today woutd just enable you to make these payments? PU 0'? \‘LOCD Emu/15 “Um‘coo {7— F"! ' ' ‘ “I 21!“ 5,000 47*"
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W rm PU mama 4. You plan to save $1,200 each yeariﬁ an Investment paying 8% annual interest, compounded annually“m
If you do this each year for ﬁfty years starting one year from today and ending ﬁfty year's from today,  how much wilt you have inﬁftyyears? er _L._
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6. You plan to set aside $500 per month in each of the next 12 months beginning at the end of this
month. If you can put the money in an investment paying 16% annual interest, compounded monthly, how much money will you have '12 months hence? !
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F‘J 1} (DOJSI‘E '3’. It is 1 January. You expect to receive $2,500 at the ends of each of the next 8 caiendar quarters. If
you can borrow money at an interest rate of 18% per year, compounded quarterly, what is the most money you could borrow against this income stream? Oe‘ a ammo” {71
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1w ldloﬁssﬂzl ' 8. You have just taken out a $350,000 30year, ﬁxedrate mortgage. The mortgage obligates you to make
360 montth payments of $2,568 each beginning one month from today. What interest rate (APR) are Wm’mmmmmgage? Some For W 01x5 COumjf rate Tim. '1“
emshe: $350,000 +72 M W 09% Cash,
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250% PMT
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 Spring '08
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