1. Suppose a condo generates $19,000 in cash flows in the first year. If the cash flows grow at 5% per year, the interest rate is 10%, and the building will be torn down in 25 years (the building is worthless after 25 years), what is the most you would pay for the condo today? Enter your response below (rounded to 2 decimal places).
2. You are planning for your retirement in 30 years. At that time you want to have saved $6,500,000. How much do you need to save each half-year for the next 30 years if the interest rate on your investment will be 6% per year (APR)? Enter your response below (rounded to 2 decimal places).
3. An investment promises to pay you $8,000 per year starting in 5 years. The cash flow from the investment is expected to increase by 1% per year forever. If alternative investments of similar risk earn a return of 8% per year, determine the maximum you would be willing to pay for this investment today. Enter your response below (rounded to 2 decimal places).
4. Consider the following bond where the coupons are paid semi-annually,
Bond CIBC
Price $996.25
YTM 10%
Years to maturity 15 years
What is the coupon rate of this bond? Enter your answer as a percentage. Enter your answer to 2 DECIMAL PLACES.
5. What are the coupon payments given a current yield of 11.8% and a price of 990.5? Enter your answer to 2 DECIMAL PLACES.
6. What is the price of a bond with a coupon rate of 6%, payable annually, a face value of $1000, 13 years to maturity, and a yield to maturity of 6.2%? Enter your answer to 2 DECIMAL PLACES.