C 298 Practice Problem Set #6 (2007 W)
Solutions will be posted on March 5, 2008
1.
Suppose you bought one share of Pouce Coupe Resorts (PCR) one year ago for $9.
Today, you received a dividend payment of $1 and sold the share for $9.50. What was
your rea
C298 Practice Problem Set #3 (2007 W)
Solutions will be posted to the web on February 8, 2008
1.
The "rule of 72" states that money doubles when interest rates and time, when multiplied
together, equal 72. How close is this for the following rates and tim
Solutions to C298 Practice Problem Set #2 (2007W)
(a)
FV = $12,000
(b)
1.
The factor for determining the future value of an annuity can be derived from the
present value annuity factor by multiplying by
. Therefore:
FV
=
A
2,000
=
$13,431.22
A
7,000
=
(b)
C 298 Practice Problem Set #2 (2007 W)
Solutions will be posted on the web on January 31, 2008
1.
(a)
What is the present value of $7,000 to be received at the end of each year for 6
years if the annual percentage rate (APR) is 10 percent compounded annua
C 298 Practice Problem Set #1 (2007 W)
Solutions will be posted to the web on January 18, 2008
1.
(a) An $8,000 loan calls for simple interest payments of 9 percent per year. Repayment of
principal and all accumulated interest is to be made at the end of
Solutions to C298 Practice Problem Set #1 (2007W)
1.
FV
(a)
=
=
=
8,000+ 8000(.09)(4)
$10,880
=
=
=
8,000 (1.09)4
$11,292.64
(b)
FV
(c)
FV
=
=
=
2.
8,000
$11,420.96
In 100 years with an interest rate of 10%
FV
=
= $13,780.61
=
= $34,064.18
and with an int
C 298 Practice Problem Set #5 (2007 W)
Solutions will be posted to the web on February 15, 2008
1.
ABC International has issued bonds with $1,000 par value paying coupons semiannually. The stated coupon rate is 8%, and the bonds have 20 years until
maturi
Solution to C298 Practice Problem Set #7 (2007W)
1.
a) The joint probability density is given by
Share B
8%
9%
10%
Total
6%
0.02
0.05
0.18
0.25
Share A
10% 12%
0.13 0.50
0.01 0.04
0.06 0.01
0.20 0.55
Total
0.65
0.10
0.25
1.00
The expected returns E(RA) an
C 2 98 Practice Problem Set #8 (2007 W)
Solutions will be posted on the web on April 10, 2008
1.
Suppose you hold the following amounts in your portfolio
Stock
Value
Sonic Youth Corp. (SYC)
$10,000
0.60
Paul's Replacements (PR)
$10,000
1.50
T-Bills
-$5,00
Commerce 298
Solutions to Practice Set #8 (2007 W)
1.
(a)
Since you are short T-Bills, your total wealth is only $20,000 !$5,000 = $15,000.
So,
=
0.40 + 1.00 !0
=
1.40
(b)
2.
Recall that rA is the Expected Return on Stock A
=
=
and
Y
or
=
=
=
Y
So
>
>
3.
C 298 Practice Problem Set #7 (2007 W)
Solutions will be posted to the web on April 3, 2008
1.
The returns of shares A and B for the coming period are represented by the following jointprobability distribution:
Share A
6%
12%
8%
.02
.13
.50
9%
.05
.01
.04
Solution to C298 Practice Problem Set #6 (2007W)
1.
so the realized return will be
r
=
=
=
16.67%
2.
so the realized return will be
r
=
=
=
16.63%
3.
=
=
=
4.
$21
=
30
=
6 !30g
g
=
=
3
0.10
5.
We know that F = 1000, c = 0.07, and cF = 70.
First, we must c
Solutions to C298 Practice Problem Set #5 (2007W)
1.
a) The YTM of 9% is an APR rate, with compounding occurring semi-annually.
.09
Thus, rsa =
= .045 .
2
1 (1.045)40
40
P0 = $40
+ $1,000(1.045) = $907.99
.045
b) If you require a YTM of 9% and if the
C 298 Practice Problem Set #4 (2007 W)
Solutions will be posted to the web on February 12, 2008
1.
What would be the market value of the bond if it had no maturity (perpetual)?
(a)
A $1,000, 20-year bond with a coupon rate of 14 percent and coupons paid a