Question 1: Find the current price of 30 day commercial paper issued with a yield of 1.25% and with face value of $100,000.
Question 2: Danny purchases a newly issued 4 year bond priced at $1015 with par value of $1000. It pays $100 interest yearly. What is the coupon rate, the current yield and the yield to maturity?
Question 3: Danny also purchases a share of General Electric stock for $14 at the beginning of the year. During the course of the year he receives dividends totaling $1.15. He sells the stock to juilet for $16.75 at the end of the year. What is his holding period return?
Question 4: Juilet buys the stock at $16.75 from Danny. Using the current dividend (now time = 0) of $1.15 and a predicted growth rate of 3%, what is GE's required rate of return, r?
Question 5: Instead, just as juilet purchases the stock, GE announces that it will be distributing all of its earnings in the form of a dividend (i.e. retaining no earnings). The dividend announced is $2.00. What is the price of the stock now (assume the required rate of return did not change from part 3)?
i) Is it true that $1 today is worth more to you than $1 in one year. Please explain
ii) What is the real future value of $10,000 which will sit in a savings account for 20 years, earning 4% interest compounded yearly during a period of 4% annual inflation?
iii) What is the present value of an annuity which makes its first payment in 3 years, makes a total of 10 payments of $10,000 each year with an overall discount rate of 7%?
iv) What is the PV of a perpetuity which pays $200 one year from today and then each year thereafter? Assume a discount rate of 8%.
v) What is the nominal future value of $10,000 one year from today if it can be invested in a portfolio that expects to earn, in real terms, 4% per year with inflation of 3% per year?