FIN 3301
Name________________________
Homework # 1
Due: Monday, February 22
Show all your work.
Time lines, formulas, and inputs to your financial calculator as
needed.
Problem # 1
Suppose a government bond will pay $1,000 three years from now.
If the going interest rate on
3year government bonds is 4%, how much is the bond worth today?
Problem # 2
Addico Corp's 2005 earnings per share were $2, and its growth rate during the prior 5 years
was 11.0% per year.
If that growth rate were maintained, how long would it take for
Addico’s EPS to double?
Problem # 3
You want to buy a condo 5 years from now, and you plan to save $3,000 per year, beginning
immediately
.
You will make 5 deposits in an account that pays 6% interest.
Under these
assumptions, how much will you have 5 years from today?
Problem # 4
What annual payment would you have to receive in order to earn an 8% rate of return on a
perpetuity that cost $1,500?
Problem # 5
What’s the present value of $2,000 discounted back 3 years if the appropriate interest rate is
8%, compounded semiannually?
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 Spring '10
 hooreman
 Finance, Interest, Interest Rate

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