FINANCE CH 2
LIQUIDITY RATIOS: show the ability to meet short-term obligations.
1. Current Ratio: Current assets
2. Quick Ratio: Current Assets Inventory
3. Cash Ratio: Cash
Zero coupon bonds: these bonds have a coupon rate of zero, i.e. they do not pay coupon
payments over the life of the bond.
Zero coupon bonds always sell for a discount, i.e. for less than par value.
Calculate the price of the following zero coupon
INTRODUCTION TO FINANCE TVM Handout
1. What is the FV in 5 years of $1,500 deposited today in a CD paying 6.5% compounded annually?
a. Compounded semiannually?
b. Compounded quarterly?
c. Compounded daily?
2. How much should you deposit today in a savings
a. Robert Williams should not retire early because the
present value of his cash flows is $1,713 greater than the $500,000
c. Ruth should take the second offer for the series of
payments because it has a higher present value than the $1,000,0
Cash Flow Analysis and Capital Budgeting
The capital budget of a firm is the cash a firm has to purchase capital goods or to invest in capital
In economics and finance capital is defined as plant and equipment, tools, machines, and intellectual