Finance Answers

6. At what price should I offer to buy a $500 bond on December 11, 2008, if I want it to yield 13%, compounded quarterly? The bond matures on April 1, 2012, and bears 11.5% coupons payable on April 1 and October 1.

4. What should be the purchase price of a $1,000 bond redeemable at 105 and bearing semi-annual coupons at 9.75%, if it is sold two years before maturity and money is worth 11%, compounded annually?

3. If money is worth 14%, compounded semi-annually, what is the value of a $150 bond bearing interest at 10.5% every six months if it is bought today and matures in five years?

1. An investor bought 5,000 preferred shares (par value $1.00) of BC Resources at $.75.5 and received a dividend of $.05. He then sold them at $.80. What was the investor’s total gain in dollars? What was the percentage gain?

1. What is the value of a $5,200 debt incurred two years ago if money is worth 13.5%, compounded semi-annually?

Now that you have a full time job you are ready to start investing for retirement. Your corporation will match 50 cents of each dollar that you put in your 401K account up to the first $7,000. You have altogether $15,000 that you can afford to save this year. How should you split your money between your 401k account and IRA accounts? Which type of IRA account probably makes the most sense at your age? (age is 21) Explain your decisions.

After multiple years of billion-dollar U.S. budget deficits, why are interest rates so low?

The Blue Lagoon is considering a project with a five-year life. The project requires $110,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 71 percent of sales, fixed costs are $9,600, and the tax rate is 35 percent. What is the operating cash flow for year 4 given the following sales estimates and MACRS depreciation allowance percentages?

Silver Bear Golf (SBG) is a manufacturer of top quality golf clubs with a specialty of putters. Currently, each putter they sell brings in $200 of revenue at a cost of $150. This past year, they sold 1,000 putters and they expect this number to grow each year by 12% until this model becomes obselete after 10 more years. The foreman at the SBG factory recently brought to your attention a new technology that could lower the cost of production. This technology requires an upfront fixed investment of $100,000 and has the capacity to produce all the putters you want to sell per year at a unit cost of $135. There is no increased working capital need due to this new technology, and no value of the machine/technology after 10 years. What is the NPV of investing in the new technology? Ignore taxes and assume a discount rate of 9%. (Hint: Think incrementally; the difference between the world without and with this new technology! Also, ignoring taxes will be a big help if you think right.)