Assignment#1 - Chapter 2 2-2 Cash flow after would be

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Unformatted text preview: Chapter 2 2-2 Cash flow after would be $13,661,977(10.4*1.0625). Thus they would not have sufficient funds from this investment to meet the $14million obligation. 2-3 (a)First 4 years: $500,000*1.057^4=$624,122 Reinvestment: $624,122*1.072^3=$768,872(=sum of future value) (b)$500,000*(1+0.061/2)^14= $761,451 2-7 [2/1.076]+[3/(1.076)^2]+[5.4/(1.076)^4]+[5.8/(1.076)^5]=$13,111,487 2-8 Bond A: $40*(1/0.035)+[1-1/(1.035)^18]+[1,000/(1.035)^18]=$1,065.90 Bond B: $45*(1/0.045)+[1-1/(1.045)^40]+[1,000/(1.045)^40]=$1,000 Bond C: $30*(1/0.05)+[1-1/(1.05)^30]+[1,000/(1.05)^30]=$692.54 Bond D: 0+[1,000/(1.04)^28]=$333.48 2-11 Bond X and Y are discount bonds which should be trading below par) where as bond V is a premium bond which should be trading above par) Chapter 3 3-12 (a)$816*(1+0.09/2)^40=$4,746.15 (b)$1,000*7%*0=$1,400 (c)$1,400*+$1,000=$2,400 (d)$4,746.15-$2,400=$2,346.15 (e)$35*F 40 0.045-$1,400=$35*[(1.045)^40-1/0.045]-$1,400=$2,346.06 3-16...
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Assignment#1 - Chapter 2 2-2 Cash flow after would be

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