book practice ex

7/31/2019 Book Practice Ex

1/40

P 136

Q 51

Period 24

An Int Rate 12

PV 4000

PMT $186.43

Q 52

Yr Amt

1 23000 NPV

2 23000

3 46000 PMT

4 46000

5 23000

6 23000

Q 53

Base Salary 35000

Bonus Comp 10000

Growing Annuity Comp 10.53983365

PV of the Base Salary 368894.1779

PV of 10% of Yrly Bonus 36889.41779

Total PV of the Salary 415783.5956

Q54

Option a

Tax Rate 28%

Ann Payment before tax 160000

Taxed Amt per yr 44800

Ann Payment after Tax 115200

PV value of the jackpot which payed for

31 years $1,201,180.55

Option b

Current Lump amt received 446000

Ann Payment before tax 101055

Tax amt per yr 28295.4

Ann Payment after Tax 72759.6


2/40

PV of jacpot amt which payed for 30 yrs

along with the initial bonus $1,131,898.53

Option b is the best option

Q55

Annual salary 55000

Retirement amt 1000000

Interest rate 10%

Growth rate 3%

Growth component 12.29852999

PV of Salary amt 676419.1494

PV of retirement amt $57,308.55

PMT to be saved every yr $4,659.79 % of the salary

Q56

Initial amt 1000

Motorcycle amt 15000

Remaining amt to be paid 14000

Annual int rate 9.60%

PMT of the remaining motor cycle loan

amt $294.71

FV of remaining amt at the end of 5 yrs $22,762.53

Amt paind at the end of 2 yrs $8,185.39

The remaining amt to be paid $9,037.33one percent pre payment penalty $90.37

So total amt paid including penalty $9,127.71

Q57

Interitance amt 750000 for nephew

Retirement income for 20 yrs 25000 per month

Amt for Rivendell 350000

per month int rate for 8% 0.00643403

Per month int rate for 11% 0.0087

PV of the retirement amt after 30 yrs $3,051,943.26

PV of the interitence amt after 30 yrsfrom now $160,911.16

total amt to be saved at the end of 30

yrs $3,212,854.41

Saving amt for 10 yrs FV at the end of

10 yrs $442,239.69

FV of the above valueat the end of 30

yrs is $3,565,474.16

FV of the Rivendell $2,821,809.04


3/40

Amt saved after the expense $743,665.12

Remaining amt to be saved after 10 yrs $2,469,189.29

PMT that needs to be saved every

month after 10 yrs $3,053.87

Q58

The cost of the car 35000

Present value of the resale $18,106.86

PV of the resale amt $14,361.31

Amt spent $16,893.14

To make it indifferent btween buying

and leasing. the present value for resale

should be $20,638.69

The resale value at the end of 3 yrs $26,216.03

Q59

renegotiated Bonus 9000000

PV of 0 8000000

PV of 1 $3,824,000.53

PV of 2 $4,386,894.03

PV of 3 $4,980,222.14

PV of 4 $5,345,788.66

PV of 5 $5,589,691.05

PV of 6 $5,725,441.49

Increase in contract value 750000

Total PV 37852037.91Contract Value increase of 750000 38602037.91 Quaterly rate

The remaining PV after removing bonus 29602037.91

PMT for quaterly payment $1,414,296.99

Q61

EAR 9%

Per month rate 0.007207323

APR 8.648787979

PV of -2 Salary $45,370.52PV of -1 Salary $44,746.15

PV of the past salary $90,116.67

PV of 5 yrs future salary $182,142.14

Amount for pain and suffering 100000

Court costs 20000

Total PV of the amount $392,258.81

PMT that needs to be paid $8,075.95


4/40

Q62

One yr loan amount 9700

interest rate 10%

upfront amt to be paid 291

Total amt including interest 11000

So the interest rate 13.40%

if interest rate is 13%

Loan amt 9800

Total amt including interest 11300

So the interest rate 15.31%


5/40

$157,899.32

$6,529.58


6/40

8.47%


7/40

Q1

for 5% $613.91

for 10% $385.54

for 15% $247.18

Q2

Face value 1000

0 for YTM 8%

0.5 40 for YTM 10%

1 40 for YTM 6%

1.5 40

2 40

2.5 40

3 40

3.5 40

4 40

4.5 40

5 40

5.5 40

6 40

6.5 40

7 40

7.5 40

8 408.5 40

9 40

9.5 40

10 40

10.5 40

11 40

11.5 40

12 40

12.5 40

13 40

13.5 4014 40

14.5 40

15 40

15.5 40

16 40

16.5 40

17 40

17.5 40


8/40

18 40

18.5 40

19 40

19.5 40

20 1040

Q3

0 -970 IRR

0.5 43

1 43

1.5 43

2 43 -970 IRR

2.5 43 43

3 43 43

3.5 43 43

4 43 43

4.5 43 43

5 43 43

5.5 43 43

6 43 43

6.5 43 43

7 43 43

7.5 43 43

8 43 43

8.5 43 43

9 43 439.5 43 43

10 43 43

10.5 43 43

11 43 43

11.5 43 43

12 1043 1043

Q4

Dividend 1.4Growth rate 6%

Return rate 12%

Current price 24.73333333

Price in 3 yrs 29.45779573

Price in 15 yrs 59.27487264

Q5


9/40

Div 1 3.1

Growth rate 5%

Current price 48

return rate 11.45833333333330%

Q6

Div 1 3.6

Growth rate 4.50%

Return rate 13%

Current price 42.35294118

Q7

Current price 70

return rate 12%

growth rate 6%

Div yld 6%

Div after 1yr 4.2

Current Div per share 3.962264151

Q8

Div 12Return rate 10%

Current price $64.02

Q9

Earnings 20000000

ROE 14%

Retained Earnings 12000000

Return on retained earnings 1680000

Earnings growth rate % 8.4nxt yr earnings will be 21680000

Q10

Option 1

0 Bond Price


10/40

0.5 40

1 40 Bond Price 1 yr from now

1.5 40 Bond price 3 yrs from now

2 40 Bond price 8 yrs from now

2.5 40

Bond price 12 yrs from

now

3 40

Bond price 13 yrs from

now

3.5 40

4 40

4.5 40

5 40

5.5 40

6 40

6.5 40

7 40

7.5 40

8 40

8.5 40

9 40

9.5 40

10 40

10.5 40

11 40

11.5 4012 40

12.5 40

13 1040

Q11

face value 1000

0 -1040


11/40

6 42

6.5 42

7 42

7.5 42

8 42

8.5 42

9 1042

Q12

0 -1095 IRR

0.5 40 YTM

1 40

1.5 40

2 40

2.5 40

3 40

3.5 40

4 40

4.5 40

5 40

5.5 40

6 40

6.5 40

7 40

7.5 40

8 408.5 40

9 40

9.5 40

10 40

10.5 40

11 40

11.5 40

12 40

12.5 40

13 40

13.5 4014 40

14.5 40

15 40

15.5 40

16 40

16.5 40

17 40

17.5 40


12/40

18 40

18.5 40

19 40

19.5 40

20 1040

Q13

Div 3

Constant Growth rate 5%

return rate for 1st 3 yrs 16% Growth Comp 1

return rate for next 3 yrs 14% Growth Comp 2

return rate for perpetuity 11%

0 DIV

1 16% 3.15

2 16% 3.3075

3 16% 3.472875

4 14% 3.64651875

5 14% 3.828844688

6 14% 4.020286922

7 11% 4.221301268

Q34

Face Value 20000Current Price of Zero Coupon

Bond $2,840.91 Current Price

0 Using PV concepts Using NPV Price at 14

0.5 0 0 Price at 6

1 0 0 Current price

1.5 0 0

2 0 0 Current Price Using NPV

2.5 0 0

3 0 0

3.5 0 04 0 0

4.5 0 0

5 0 0

5.5 0 0

6 0 0

6.5 1200 1200

7 1200 1200

7.5 1200 1200


13/40

8 1200 1200

8.5 1200 1200

9 1200 1200

9.5 1200 1200

10 1200 1200

10.5 1200 1200

11 1200 120011.5 1200 1200

12 1200 1200

12.5 1200 1200

13 1200 1200

13.5 1200 1200

14 1200 1200

14.5 1500 1500

15 1500 1500

15.5 1500 1500

16 1500 1500

16.5 1500 1500

17 1500 1500

17.5 1500 1500

18 1500 1500

18.5 1500 1500

19 1500 1500

19.5 1500 1500

20 1500 21500

Q32MKT rate 8%

0 Current Bond Price

1 100 Current Yield

2 100 Capital Gains Yield

3 100

4 100

5 1100

0

1 60 Current Bond Price2 60 Current Yield

3 60 Capital Gains Yield

4 60

5 1060


14/40

$1,000.00

$828.41

$1,231.15


15/40

9.01%

9.063%


16/40

Option 2

0

$1,178.77 0.5 30


17/40

1 30

$1,169.36 1.5 30

$1,148.77 2 30

$1,085.30 2.5 30

$1,019.13 3 30

$1,000.00 3.5 30

4 30

4.5 30

5 30

5.5 30

6 30

6.5 30

7 30

7.5 30

8 30

8.5 30

9 30

9.5 30

10 30

10.5 30

11 30

11.5 30

12 3012.5 30

13 1030

7.774% 3.887%

8.076923077

7.924929433


18/40

3.552%

7.103150499


19/40

2.348715097

2.429289984

Pv of the perpetuity 70.35502113 Curr Value $37.61

PV at the end of 3 yrs 56.34608676

Current share price $43.50

In this problem the return rate differs instead of the growth rate so when converting all the values to th

$10,633.29

PV of face value

$13,294.88 $3,391.44 2840.91

$13,005.32 $7,241.85

$13,474.20

$13,474.20


20/40

$1,079.85 P1 $1,066.24

9.26%

############### YTM-Current Yield Capital Gain -1.26% (P1-P0)/P0

$920.15 P1 $933.766.52%

############### YTM-Current Yield Capital Gain 1.48% (P1-P0)/P0


21/40


22/40


23/40

Bond Price $840.17


24/40

Bond Price 1 yr

from now $847.53

Bond price 3

yrs from now $864.10

Bond price 8

yrs from now $918.89Bond price 12

yrs from now $981.14

Bond price 13

yrs from now $1,000.00


25/40


26/40

present the interest rate differs so we have to come from the reverse first converting the 11% to the pre


27/40


28/40


29/40


30/40


31/40


32/40


33/40

sent value of date 6 then converting it to date 3 we have to consider 14% and then converting it into da


34/40


35/40


36/40


37/40


38/40


39/40


40/40

te 0 we have to consider 16%

book practice ex

Documents