Alex Shelton
Corporate Finance
Module 2 Homework Assignment
October 16, 2014
Chapter 3
P3-4
A.
For a 10 year period to equal $1,000,000
At 6%, the minimum you would sell the trust fund for would be $558,394.78
At 9%, the minimum you would sell the trust f
Present Value
Sarah Attaya wants to give her daughter $25,000 in 8 years to start her own business. How
much should she invest today at an annual interest rate of 8% compounded annually to have
$25,000 in 8 years?
a.
b.
c.
d.
e.
25,000 +/8
n
8
i
0
PMT
PV
DIF: E REF: 4.2 Bond Prices and Interest Rates study guide
1. Bavarian Sausage just issued a 10 year 12% coupon bond. The face value of the bond is $1,000 and
the bond makes semiannual coupon payments. If the bond is trading at $867.25, what is the bonds
4.4 Bond Markets Study Guide
1. You just bought a 5 year zero coupon bond with a $1,000 face value for $735.67. What is the taxable
capital gain on this bond next year? a. $274.33 b. $68.51 c. $169.47 d. $46.64
ANS: D FV: 1000 PV: 735.67 PMT: 0 N: 5 I/Y:
4.5 Advanced Bond Valuation Study Guide
1. The value of any asset a. is based upon the benefits provided by the asset in prior years. b. is based
upon the benefits that the asset will provide the owner of the asset this year. c. equals the present value
o
Chapter 4-1 Study Guide
MULTIPLE CHOICE
1. A 15 year, 8%, $1000 face value bond is currently trading at $958. The yield to maturity of this bond
must be a. less than 8%. b. equal to 8%. c. greater than 8%. d. unknown.
ANS: C DIF: E
2. A bond that grants t
4.2 Bond Prices and Interest Rates Study Guide
1. You are considering the purchase of a motorized scooter where the price of the scooter is based upon
the miles per gallon (mpg) of gasoline that the scooter can achieve. That is, the current price of the
s
4-8 Stocks and Bills Study Guide
1. A bond issued by the Federal Home Loan Bank or the Federal Home Loan Mortgage Corporation are
examples of what type of bond? a. Treasury bond b. Corporate bond c. Municipal bond d. Agency bond
ANS: D DIF: E
2. The Treas
4-7 Bond Volatility Study Guide
1. Oogle Corp. has decided to do things differently with respect to their corporate bond issue. They have
a bond outstanding that makes quarterly coupon payments instead of semi-annually. The stated coupon
rate on the bond
4-6 Bond Term Structure of Interest Rates Study Guide
1. The relationship between time to maturity and yield to maturity for bonds of equal risk is referred to
as a. the term structure of interest rates. b. the forward rate. c. the spot curve. d. the forw
Future Value
Today Bob Jones purchased an investment grade gold coin for $50,000. He expects the coin to
increase in value at a rate of 12% compounded annually for the next 5 years. How much will the
coin be worth at the end of the fifth year if his expec
Answers to End-of-Chapter Questions
Q8-2. In statistics, you learn about Type I and Type II errors. A Type I error occurs when a statistical test
rejects a hypothesis when the hypothesis is actually true. A Type II error occurs when a test fails
to reject
Alex Shelton
Corporate Finance
Module 1 Homework Assignment
October 9, 2014
Chapter 1
3.
Sole Proprietorship: no distinction between the business owner and the business, but it
could be hard to keep work from home life. Also, business liabilities become
Alex Shelton
Corporate Finance
Module 4 Homework Assignment
October 30, 2014
Chapter 8
P8-3
A
The average contribution to net income is
(7,500+9,100+9,100+9,100)/4 = $8,700
The average book value of the computers are
(20,000+15,000+10,000+5,000)/4 = $12,5
1) What are the advantages and disadvantages of different legal forms of business organizations?
a) Sole Proprietorship Advantages
i) one owner, therefore one controller
ii) simplest and most common form of business
iii) easiest to form
iv) spouses of the
P4-17.
a. Bond A = $1,220.80
Bond B = $659.92
Bond C = $957.88
FV=1,000; PMT=9%x1,000=90; I=6%, N=10
FV=1,000; PMT=1%x1,000=10; I=6%, N=9
FV=1,000; PMT=5%x1,000=50; I=6%, N=5
b. Bond A = $1,140.47 a decrease of about 6.6%
Bond B = $609.09 a decrease of ab
Answers to End-of-Chapter Questions
Q7-2. The table below shows the expected return and standard deviation for two stocks. Is the pattern
shown in the table possible?
Stoc
Beta Std. Dev.
k
#1
1.5
22%
#2
0.9
35%
A7-2. Yes, this is possible. A stock with a
Using the Formulas
Assume a client wants to know the Future Value of an investment
of $500 in an investment with an interest rate of 6%, which
they will sell in 4 years.
1. First what is the Multiplication Factor?
2. What is the Future Value?
FV = PV (1+i
Module 1 Homework
Torie Winchester
Corporate Finance
Chapter 1
Q1-3: What are the advantages and disadvantages of different legal forms of business organizations?
Could the limited liability advantage of a corporation also lead to an agency problem? Why?