Question 1

Bi = 1.4
rp = 0.0225
ri = 0.03
E(Ri) = ?
[E(Rm) - Rf] = 0.06
Rf = 0.053175

RCC = 0.137175

Question 2
D0 = $2.50
P0 = $30
g= 0.08
R= 0.17

Question 3
r= 0.14
Year 0 1 2 3 4
Cash Flow -750 450 350 150 125
Present Value -750 394.7368 269.3136 101.2457 74.01

Question 4
c= 0.09 c= 0.09
m= 2 m= 2
n= 23 n= 23
VB = $1,050.15 VB = $870.72
C= 90 C= 90
C/m = 45 C/m = 45
YTM1 = r1 = 0.085 YTM2 = r2 = 0.105

VB Change = -0.1708649737 <- See 6_FINA.5010_SA_BondValuation_Solutions

<- See 7_HW_Question in Week 5
Question 5
rp = 0.02
ri = 0.035
R= 0.0768
rr = ?

rr = 0.01998673866
Lower Medium Grade

Question 6
Currently 20 years old
FV = $1,000,000
PV = $32,500
r= 0.1025
Compounded Annually
n= 35.1

Years old = 55.1

Question 7
F= $1,000
C= $100
n= 7
VB = $1,000

Coupon Rate = 0.1

Coupon Rate = YTM, since face value and market value are the same
Quoted Price = 100

I, 3 ONLY (1 and 3)

Question 8 PV
D1 $6 $4.9180 P0 = 45.45454545
D2 $6 $4.0312 D= 10
D3 $6 $3.3042 R= 0.22
D4 $8 $3.6112
D5 $8 $2.9600
D6 $8 $2.4262 PV = 11.2995
D7 $8 $1.9887
D8 $10 $11.30 Enter:
D9 $10 FV = 45.454545
D10 $10 r= 0.22
D11+ $10 n= 7
R= 0.22 m= 1

P0 = $34.5390

Question 9
30 year mortage
6.65% APR
monthly payment is $1,600

Borrowed = $249,235

Question 10
rr = 0.035
rp = 0.0275
ri = 0.03
Rf = ?

RF = 0.058325

Question 11
D0 = $5.50
g= 0.1
R= 0.2
P0 = ?

P0 = $60.50

Question 12
g= -0.1
D0 = $4
R= 0.16
P0 = ?

P0 = $13.85

Question 13
rp = 0.025
ri = 0.03
rr = 0.015 <- Upper medium grade
R= ?

R= 0.07158625

Question 14
Bond X Bond Y
Face Value (F) $1,000 $1,000
Annual Coupon Payment (C) $120 $130
Payment Frequency (m) 2 1
Years to Maturity (n) 15 15
Price (VB) $890.04 $925.88
C/m $60 $130
r 0.1375 0.1422
re 0.1422 0.1422
Bond Price of Y?

Question 15
VB = $1,100
n= 10
m= 2
r= 0.09
c= ?

C/m = 52.685
C= 105.37
c= 0.10537

Question 16
VB = $1,166.93
c= 0.1025
m= 2
n= 20
r= ?

C= 102.5
C/m= 51.25
r= 0.085

Question 17
D7 = $3.50 PV = 15.9616
g= 0.07
R= 0.16 Enter:
P0 = ? FV = 38.888888
r= 0.16
P6 = $38.89 n= 6
P0 = $15.96 m= 1
Question 18 Year 1 Year 2
Sales $45,000 $60,000
COGS $12,000 $12,000
Gross Margin $33,000 $48,000
SG&A $10,000 <- 20% of SG&A costs are fixed
Depreciation $3,000
EBIT $20,000
Interest $2,500
Taxable Income $17,500

$2000 fixed $2000 fixed

5.625 $10,667
$12,667

Question 19
Yd = 0.09
P0 = $18
g= 0.06
D0 = ?

D1 = 1.62
R= 0.15
D0 = $1.53

Question 20
D6 = $45
R= 0.1
n= 6

P0 = $25.40

Question 21 PV
D1 $7 $6.03
D2 $7 $5.20
D3 $7 $4.48
D4 $8 $4.42
D5 $8 $3.81
D6 $8 $3.28
D7 $9 $3.18
D8 $9 $2.75
D9 $9 $2.37
D10 $10 $2.27
R = 0.16
P0 = ?

P0 = $37.80
 5
-100
-51.9369 37.3692
Question 4
FROM WEEK 5 HOME WORK Q10

c 0.08
m 2
n 15
VB-original $1,091.96
r-original 0.07
r-new 0.09
VB-new $918.56
% VB change -15.87970255