Questions -
Question 1 - Abe is contemplating a college fund for his two children and would like to accumulate $100,00 in this fund in the upcoming 14 years. Abe would open the account today with a deposit of $4,000. He is looking at a fund that uses an interest rate of 1.5% nominal annual rate with monthly compounding.
a. How much would Abe have to deposit annually?
b. How much would Abe have to deposit Quarterly?
c. How much would Abe have to deposit Monthly?
Question 2 - Annabelle is retiring this year and has a $400,000 retirement fund that she has accumulated.
a. What nominal rate of interest from a fund that compounds monthly would Anabelle need if she withdraws $2,000 at the end of each month for 20 years? Assume that all funds would be depleted at the end of the 20 years.
b. What nominal rate of interest from a fund that compounds monthly would Anabelle need if she withdraws $2,000 at the end of each month for 20 years, spends $10,000 on a European vacations immediately after retiring, and has $25,000 in the account at the end of 20 years for emergency purposes.
Question 3 - Latoya's makes payments on a student loans of $500 on the first day of each of month that has a balance today of $24,000 and has an effective annual rate of 4%.
a. What would be the balance on the loan at the end of three years?
b. What would be the balance on the loan at the end of three years if she also paid $2,500 on the loan today.
Question 4 - Honest John's Car Dealership advertises "no credit will be refused" plan as follows. You pay $1,000 up front and $100 at the end of each week until the loan is paid off.
a. How many weeks would it take to pay for a $30,000 car if Honest John earns 5.00% EAR?
b. If Honest John will accept the car at 15% of its original price as the last payment, how many weeks of payments would be needed to pay for the car? (Assuming that the car is in good condition)
Question 5 - Pat Davis runs a summer camp for kids with the average expenses in in each month as shown below. The camp uses a savings account for all funds that pays interest of 1.00% nominal annual rate with monthly compounding.
Pat is getting older and wants to fund the camp in perpetuity by investing in a fund that earns 6% NAR compounded monthly. A single amount is to paid out of the fund each year to cover the year's expenses. How much would have to be in the fund?
|
Month
|
Expenses
|
|
Jan
|
$5,000
|
|
Feb
|
$5,000
|
|
Mar
|
$5,000
|
|
Apr
|
$10,000
|
|
May
|
$10,000
|
|
Jun
|
$25,000
|
|
Jul
|
$40,000
|
|
Aug
|
$35,000
|
|
Sep
|
$10,000
|
|
Oct
|
$5,000
|
|
Nov
|
$5,000
|
|
Dec
|
$5,000
|
Question 6 - Warren Gates is planning an investment in a start-up company that is working on a medication based on nanotechnology breakthroughs. This medication would be used in developing countries to eradicate a disease. Is estimated that it will take 7 years at $5 million annually to do the research to develop this medicine and make it ready for distribution including all governmental approvals. Additionally once the medicine is approved, it will cost $1 million annually to produce and administer the medicine and this is planned to be used for 10 years (years 8-17).
How much in today's money should Warren Gates put into this fund today to totally cover this project assuming that the fund will earn an effective annual rate of 12%.
Question 7 - Nellie purchased $1,000,000 of bonds issued by a foreign country ten years ago. The coupon on the bond was 7.5% paid semi-annually. The foreign country has made all bond payments for 10 years. The country now has dire financial problems and a hedge fund has offered to buy back the bonds for 50% of the face value. Ignore any fees and taxes concerning the bonds.
a. What effective annual rate would Nellie have earned if the Bonds sold for their face value today at the end of ten years (assume that the last coupon was received)?"
b. What effective annual rate would Nellie have earned if 50% of the bond's face value was paid to Nellie today at the end of ten years (assume that the last coupon was received)?"
Question 8 - Third Consulting Group, LLC organized and presents seminars for business executives that feature a nationally known speaker. The attendance fee is $1,000 per attendee. The costs that they incur for a seminar are listed below.
a. If 100 executives attend, what is their profit?
b. What is the break even quantity?
c. If the seminar fee, fixed cost and the variable cost per unit stay the same as last year, what will the attendance have to be to increase profits to $100,000?
d. If attendees are limited to 100, and fixed cost and variable cost per unit stay the same, what price would have to charged to increase the profits to $100,000?
Registration Fee $1,000
Facility rental $25,000
Food per attendee $200
Amenities per attendee $250
Speaker costs $25,000
Question 9 - The Ceynar Group, INC has collected the following data for their partnership. (Data attached)
a. Prepare a formal income statement that contains the relevant subtotals.
b. Prepare a formal cash flow statement that contains the relevant subtotals. Assume that no taxes are due on the property sale.
Attachment:- Assignment File.rar