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FINC 600 Week 1 Homework
Problem 1-6
In most large corporations, ownership and management are separated. What are the main implications of this separation?
Problem 1-8
We can imagine the financial manager doing several things on behalf of the firm’s stockholders. For example, the manager might:
a. Make shareholders as wealthy as possible by investing in real assets.
b. Modify the firm’s investment plan to help shareholders achieve a particular time pattern of consumption.
c. Choose high- or low-risk assets to match shareholders’ risk preferences.
d. Help balance shareholders’ checkbooks.
But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
Problem 2-9
A. The cost of an automobile is $10,000. If the interest rate is 5%, how much would you have to set aside now to provide this sum in five years?
B. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you set aside today to cover these bills?
C. You have invested $60,476 at 8%. After paying the above school fees, how much would you remain at the end of six years?
Problem 2-12
What is the PV of $100 received in:
A. Year 10 (at a discount rate of 1%)
B. Year 10 (at a discount rate of 13%)
C. Year 15 (at a discount rate of 25%)
D. Each of years 1 through 3 (at a discount rate of 12%)?
Problem 3-3
In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5985%. Recognizing that coupons are paid semiannually, calculate the bond’s price.
Problem 3-4
Here are the prices of three bonds with 10-year maturities:
|
Bond Coupon (%) |
Price (%) |
|
2 |
81.62 |
|
4 |
98.39 |
|
8 |
133.42 |
If coupons are paid annually, which bond offered the highest yield to maturity?
Which had the lowest?
Which bonds had the longest and shortest durations?
Instruction:
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NAME: |
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The question is provided for each problem. You may need to refer to your textbook for additional information in a few cases. |
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You will enter the required information into the shaded cells. |
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The cells are coded: |
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T requires a text answer. |
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C requires a calculation. You cannot perform the operation on a calculator and then type the answer in the cell. You will enter the calculation in the cell, using Excel format/formula/function and only the final answer will show in the cell. I will be able to review your calculation and correct, if necessary. |
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F requires a number only. In some problems, a “Step 1” is added to help you solve the problem. |
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Name your assignment file as “lastnamefirstinitial-FINC600-Week#“, and submit by midnight ET, Day 7. |
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The writer is very fast, professional and responded to the review request fast also. Thank you.
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