Chapter 15: Problems 1, 3, 6, 10;
Chapter 16: problems 3, 4, 7
CHAPTER 15 PROBLEMS
15-1. If a six-month Treasury bill is purchased for $0.9675 on a dollar (i.e., $96,750 for
a $100,000 bill), what is the discount yield, the annual rate of interest, the
co
Chapter 8: Problems: 2, 3, 5, 6, 8.
CHAPTER 8 PROBLEMS
8-2.
A firm has the following items on its balance sheet:
Cash
Inventory
$ 20,000,000
134,000,000
Notes payable to bank
Common stock ($10 par; 1,000,000 shares outstanding)
31,500,000
10,000,000
Retai
Chapter 9: problems: 2, 4, 7
Chapter 10: problems 4, 11, 13, 17
CHAPTER 9 PROBLEMS
9-2.
An investor requires a return of 12 percent on risky securities. A stock sells for
$25, it pays a dividend of $1, and the dividends compound annually at 7 percent.
Wil
Chapter 14: Problems 1, 3, 5, 9, 15, 20, 25
CHAPTER 14 PROBLEMS
14-1. A $1,000 has a coupon rate of 8 percent and matures after ten years.
a) What is the price of the bond if the rate of interest is 8 percent?
1000=PV(1+.08)10
1000=PV(1.08)10
1000=PV(2.15
Why are bonds considered as less risky investments than as stocks? Discuss duration and portfolio
immunization.
In general, bonds are considered less risky investments compared to stocks for many reasons.
The first reason is that they carry a promise to t
HW 8
Chapter 6
2. Load fee: $25 - $23.40 = $1.60
Load fee as a percent of net asset value:
$1.60/$23.40 = 6.8%
4. The investor received $0.58 and experienced appreciation of $3.41 ($23.41 - $20)
for a total gain of $3.99. On an investment of $20, the retu
HW 6
Chapter 15
1. The T-bill is purchased for $96,750 and will pay $100,000 when retired.
The discount yield is
($3,250/$100,000)360/180 = 6.5%.
The annual yield is
($3,250/$96,750)(365/180) = 6.81%.
The compounded yield is
.5
$96,750( 1 + i) = $100,000
HW 7
CHAPTER 17
2. a. Intrinsic value of the call: $26 - 25 = $1
Time premium: $4 - 1 = $3
b.
Price of the stock
$20
25
30
40
Value of the call at expiration
$0
0
5
15
c. If the price of the stock rises from $26 to $40 (a 54 percent increase), the price o
HW 3
Chapter 9
2. V = $1(1 + .07) = $21.40
.12 - .07
If the price is $25, the stock is overvalued, and the investor should not buy it.
According to the dividend-growth model, the investor should pay no more than
$21.40 in order to earn the required rate o
Chapter 14
Mikayla Blake
INV 354
1. The current price of the bond in interest at 8% would be 1,000. Equal to par value of 1,000.
b) PMT= 80
i= 0.10 N=10
80(6.1445)+ 1000(0.3855) = 877.06 price of bond
c) 80/1000*100= 8% Bond A
80/877.06*100= 9.12% Bond B
Chapter 6: Problems 2, 4, 5. Chapter 7: Problems 1, 2
CHAPTER 6 PROBLEMS
6-2.
A mutual funds net asset value is $23.40 and the fund sells its shares for $25.
What is the load fee as the percentage of the net asset value?
25-23.5/23.5 *100 =6.383 percent
6