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Unformatted text preview: FNAN 301, Fall 2010, final, solutions Find implied rate and use it to get PV or FV 1. Three years ago, Bennett had $3,000 in his account. In 6 years from today, he expects to have $12,000. If he expects to earn the same implied return each year from 3 years ago to 6 years from today, then how much does he have today? 1. Three years ago, Bennett had $4,000 in his account. In 6 years from today, he expects to have $16,000. If he expects to earn the same implied return each year from 3 years ago to 6 years from today, then how much does he have today? 1. Three years ago, Bennett had $6,000 in his account. In 6 years from today, he expects to have $24,000. If he expects to earn the same implied return each year from 3 years ago to 6 years from today, then how much does he have today? 1. Three years ago, Bennett had $7,000 in his account. In 6 years from today, he expects to have $28,000. If he expects to earn the same implied return each year from 3 years ago to 6 years from today, then how much does he have today? 1 FNAN 301, Fall 2010, final, solutions Conceptual and quantitative: present value of a single cash flow and an annuity due 2. Fresh Fowl Inc. just bought an industrial freezer from Carls Coolers Inc. Fresh Fowl has been offered the 3 possible payment options described in the table. If the discount rate is 7.5%, which one of the assertions is true? Option Terms of payment (amount and timing) from Fresh Fowl to Carls Coolers A A series of annual payments of $4,200, with the first payment due later today and the last payment due in 4 years from today B $23,000 in 3 years C $18,000 today A. Fresh Fowl should prefer option A more than option C and Fresh Fowl should prefer option B more than option C B. Fresh Fowl should prefer option A more than option C and Fresh Fowl should not prefer option B more than option C C. Fresh Fowl should not prefer option A more than option C and Fresh Fowl should prefer option B more than option C D. Fresh Fowl should not prefer option A more than option C and Fresh Fowl should not prefer option B more than option C 2. Fresh Fowl Inc. just bought an industrial freezer from Carls Coolers Inc. Fresh Fowl has been offered the 3 possible payment options described in the table. If the discount rate is 6.7%, which one of the assertions is true? Option Terms of payment (amount and timing) from Fresh Fowl to Carls Coolers A A series of annual payments of $4,900, with the first payment due later today and the last payment due in 4 years from today B $26,000 in 3 years C $21,000 today A. Fresh Fowl should prefer option A more than option C and Fresh Fowl should prefer option B more than option C B. Fresh Fowl should prefer option A more than option C and Fresh Fowl should not prefer option B more than option C C. Fresh Fowl should not prefer option A more than option C and Fresh Fowl should prefer option B more than option C D. Fresh Fowl should not prefer option A more than option C and Fresh Fowl should not prefer option B more than option C 2 FNAN 301, Fall 2010, final, solutions...
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This note was uploaded on 02/03/2011 for the course FINANCE 301 taught by Professor Murray during the Spring '09 term at George Mason.
 Spring '09
 MURRAY

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