Discussion Group Exercises
1. The Dutch purchased Manhattan Island for $24 in 1630. What would Manhattan Island be worth today in 2008 assuming compound annual interest of 5%? 2. Explain what would happen to your answer to #1 if a higher interest rate wer
CHAPTER 3 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Notes to Professors: A good bit of relative
CHAPTER 9 STOCKS AND THEIR VALUATION
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Expected dividend yield
1
Answer: a
EASY
.
If D1 = $2.0
CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
Note to Professors: We designated most of these questions as being MEDIUM. However, their difficulty as seen by students will depend
CHAPTER 8 RISK AND RATES OF RETURN
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Expected returns
1
Answer: a
EASY
.
T. Martell Inc.'s sto
CHAPTER 5 FINANCIAL MARKETS AND INSTITUTIONS
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
Multiple Choice: Conceptual Note to Professors: We designated most of these questions as being MEDIUM. However, their difficulty as se
CHAPTER 7 BONDS AND THEIR VALUATION
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Bond valuation
1
Answer: a
EASY
.
The Carter Company's b
CASH FLOW ESTIMATION AND RISK ANALYSIS CHAPTER 12
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Note to Professors: We designated many of thes
CHAPTER 11 THE BASICS OF CAPITAL BUDGETING
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
NPV (constant cash flows; 3 years)
1
Answer: a
EASY
CHAPTER 2 TIME VALUE OF MONEY
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
FV of a lump sum
1
Answer: a
EASY
.
What would the future valu
CHAPTER 4 ANALYSIS OF FINANCIAL STATEMENTS
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems Notes to Professors: A good bit of relatively simple
CHAPTER 10 THE COST OF CAPITAL
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)
PART I New and Revised Carryover Problems and Questions
Multiple Choice: Problems
Component cost of preferred stock
1
Answer: e
EASY
.
Klieman
Finance 254
Additional Time Value of Money Problems
1
If I sell one of my kidneys for $5000 and deposit the proceeds in an account earning 7.25% per year, what amount will I have available in 7 years?
2
That guy from N'Sync, Lance Something, wants to go t
Finance 254
Time Value of Money (Annual Periods)
Time value of money is just another way of saying that we would rather receive a payment of $X today than tomorrow. If we have money today but do not want to spend it until a later date, we can always place
Learning Objectives
Students should be able to understand and perform the following from Chapter 4 1. How to use (calculate) financial ratios. 2. How to interpret and compare ratios. 3. How to manipulate financial ratios. 4. How to use DuPont Equation to
Learning Objectives Students should be able to do and understand the following from Chapter 3 and Appendix 3A 1. Interpret the information contained in the balance sheet, income statement, and statement of cash flows. 2. Explain why income differs from ca
Learning Objectives
Students should be able to do the following from Chapter5: 1. Find FV and PV of a single cash flow on an annual and non-annual interest basis. Find FV and PV of annuities on an annual and non-annual basis. Solve for rate of return in t
Finance 254
Bond Valuation
Also Recommended : Problems From Textbook, Chapter 7 – 7, 8, 10
1
Consider a bond with the following description :
- Par value of $1000
- 12 years to maturity
- Coupon rate of 5.675% [annual coupon payments]
(a) If this bond is
Finance 254
Bond Valuation Answers
Problem 1:
(a) FV = $1000 PMT = (0.05675*1000) = $56.75 N = 12 PV = -$952.45 . . . solving for the interest rate, we find the yield to maturity is 6.25% I = 5.75% PMT = (0.05675*1000) = $56.75 N = 12 FV = $1000 . . . sol
Finance 254
Bonds: Characteristics, Pricing, Returns, Risks, and Relationships
Bond Characteristics
Indenture: The contract between the issuer and the bondholder, which defines the obligations of the issuer. Type of Issuer: Federal government (includes go
Finance 254
Duration and Interest Rate Risk
Duration is often described as the effective maturity of an asset. In general, the maturity date of an asset is not a good indication of the longevity of that asset because it does not consider how much of the v
Finance 254
Related Terms Chapters 6 and 7 Yields / Interest Rates
discount rate any interest rate that is used to either discount cash flows back in time or compound cash flows forward in time. yield to maturity the yield that is earned on a bond when it
Student Learning Goals: Chapter 7
1. Understand the vocabulary that describes bonds and the markets in which they trade. 2. Annual and semi-annual bond valuation. 3. Interpret the relationship between bond prices and interest rates. 4. Calculate the yield
Finance 254
The Term Structure of Interest Rates
The Determinants of Interest Rates
As a starting point in our discussion of the determinants of interest rates, consider bonds issued
by the U.S. Treasury. Purchasing a bond from the U.S. Treasury is really
Finance 331 CAPM Handout (Chapter 7) The Capital Asset Pricing Model, or CAPM, is a theory of the relationship between risk and return and explains how financial assets are priced under certain conditions. The standard deviation, or , of a security's retu
Learning Objective
Things students should know from Chapter 1: 1. The advantages and disadvantages of different forms of business organizations.
1. Goal of the firm.
1. Stock Prices and Shareholder Value.
1. Conflicts between managers and shareholders (ag
Finance 254
Yet Another Set of Time Value of Money Problems
Also Recommended : Problems From Textbook, Chapter 5 - 25, 32, 33, 39, 41
1
Word to your mutha: Vanilla Ice is working on a new "artistic musical project". If this album is the demonstration of g
Finance 254
Additional Time Value of Money Problems
Annuities Due, Perpetuities, and Non-even Cash Flow Streams
1. In ten years, you would like to have $10,000 saved as a down payment on a new home. To accumulate this amount, you will make ten equal depos