Review Questions _ Interest Theory - Part 3
1. Steve bought 100 shares of stock on March 1 and sold the stock 6 months later. The
bid and ask prices were:
Bid Ask
March 1 60.25 60.50
September 1 68.50
Homework - Theory of Interest - Part 3
l. The bid and ask prices of stocks A and B are as follows:
Bid Ask
Stock A 99.50 100.00
Stock B 75.25 76.00
You buy one share of stock A and sell two shares of
Homework - Theory of Interest (Part 1)
1. Money accumulates in a fund at an effective annual interest rate of 1 during the rst
five years and at an effective annual interest rate of 2i thereafter.
A d
Homework 2 Theory of Interest
which earns an annual effective rate of 6%. At the end
1. 1000 is deposited into Fund X,
1113 an additional 100 dollars is withdrawn from the
of the first year, the inter
Homework 3
due Thursday, February 27 2014
1 [15pts] We take out a loan for $10,000 that accrues interest at an annual eective rate of 5%.
Rather than making level payments, weve worked out a deal with
Her among nu; 0:;
A! quooo * 020%;
X: IS!
\033
35 COOAJrQOB CtooBvzo) = 100(A#B)+,+O :70
A A 532 #2
3. Swwm shori CH 4km. bcL Pmoe. on Jan\
1007mm 10: H180
30m Covers skewi- on Ju l a+ 41mg, ash PH;
l
Review Problems Theory of Interest (Part 2)
for 5 years. The payments earn
are invested at the end of each year
1. Payments of 1000
effective rate of 10%.
interest at an annual
ested at an annual effe
Homework 2
due Thursday, February 6 2014
1 Suppose I wish to purchase a perpetuity, whose payment at the end of n years is Pn , where
P0 = 0, P1 = 1, and
4
1
Pn = pn1 + pn2
5
4
for n 2. How much is it
Review Questions Interest Theory - Section 1
1. At an effective annual interest rate of i, each of the following two sets of payments has
a present value of K.
(I) A payment of 121 immediately and ano
Interest Problems
1.
Eric deposits $100 into a savings account at time 0, which pays interest at a nominal rate of
i, compounded semiannually. Mike deposits $200 into a different savings account at ti
Homework 3
Thursday, September 17th
Name:
Username.#:
3.1. An investment requires an initial payment of $10, 000 plus annual payments of $1, 000 at
the end of each of the rst ten years. Starting at th
Annuity Problems
1.
Kathryn deposits 100 into an account at the beginning of each 4-year period for 40 years. The
account credits interest at an annual effective interest rate of i. The accumulated am
Basic Annuity Problems
1.
Math 618
Find a25|0.6 , s25|0.6 , a
25|0.6 , and a|0.6 .
Answer
2.
A loan for 8,000 must be repaid with 6 year-end payments at an annual rate of 11%. What is
the annual payme
Duration Problems
Name
1.
An investment pays 1000 in three years and 3000 at the end of the fourth year. An
investor has purchased it to yield the annual rate i = 0.075. Find the duration and the
modi
Basic Derivative Problems
1.
Name
Select the family member who is offering the most diversification to the rest of the family.
A. Dad works for General Motors
C. Daughter works for Jiffy Lube
2.
Assum
Mortgage Problems
1.
John borrows 10,000 for 10 years at an annual effective interest rate of 10%. He can
repay the loan using the amortization method with payments of 1627.45 at the end of
each year.
Yield Rate Problems
1.
Name
An investor is asked to invest 11,000 and is promised in return a payment of 4000 in the first
year, 5000 in the second year and 4500 in the third year. Find his IRR.
Answe
Net Working Capital (NWC) = Current assets (CA) Current liabilities (CL)
Cash Flow from Assets (CFFA)= Operating cash flow Net capital spending NWC
Operating cash flow = EBIT + depreciation taxes
Ope
Homework 6
Wednesday, October 21st
Name:
Username.#:
6.1. A 35 year loan is to be repaid in equal annual installments. The amount of interest paid
in the 8th installment is $135. The amount of interes
Homework 5
Thursday, October 8th
Name:
Username.#:
5.1. An annuity pays $1 today, $2 in one year, $3 in two years, . $20 in nineteen years. The
annuity will pay $20 for 30 years (the rst payment being
Homework 7
Wednesday, October 28th
Name:
Username.#:
7.1. A $1, 000 par value bond with 9% coupons payable semiannually is purchased for $1, 300.
The yield to the purchaser is 6% convertible semiannua
Homework 8
Wednesday, November 11th
Name:
Username.#:
8.1. The following are the current prices of zero-coupon bonds that have redemption value
$1000:
Term to Maturity
Price
1
2
3
$943.40
x
$805.08
(a