Financial Math Answers

Consider Bond XYZ

Coupon rate: 9,75% per year

Yield to maturity: 11,4% per year

Maturity date: 15 April 2046

Settlement date: 29 November 2021

The clean price is

[1] R88,77706%.

[2] R81,69720%.

[3] R85,22964%.

[4] R86,37296%.

[5] R86,39294%

Consider Bond XYZ

Coupon rate: 9,75% per year

Yield to maturity: 11,4% per year

Maturity date: 15 April 2046

Settlement date: 29 November 2021

The accrued interest is

[1] R1,20205%.

[2] R2,34537%.

[3] R5,87781%.

[4] R1,18207%.

[5] none of the above

If the NPV (Net Present Value) of a shop is R195 000 and the profitability index is 1,24375, the initial investment in the shop is

[1] R86 908.

[2] R800 000.

[3] R195 000.

[4] R156 784.

[5] none of the above.

An investment with an initial outlay of R500 000 generates five successive annual cash inflows of R75 000, R190 000, R40 000, R150 000 and R180 000 respectively. The internal rate of return (IRR) is

[1] 7,78%.

[2] 27,0%.

[3] 9,48%.

[4] 21,3%.

[5] none of the above.

Marang borrowed money that must be repaid in nine payments. The first four payments of R2 000 each are paid at the beginning of each year. Thereafter five payments of R5 000 each are paid at the end of each year. Note there is only one payment per year. If money is worth 6,85% per year, then the present value of these payments is

[1] R33 000,00.

[2] R27 845,64.

[3] R22 588,92.

[4] R23 054,54.

[5] R27 381,02. 

Thulisile bought a house and managed to secure a home loan for R790 000 with monthly payments of R9 680,70 at a fixed interest rate of 13,75% per year, compounded monthly, over a period of 20 years. If an average yearly inflation rate of 9,2% is expected, then the real cost of the loan (the difference between the total value of the loan and the actual principal borrowed) is

[1] R201 642.

[2] R270 749.

[3] R588 358.

[4] R1 060 749.

[5] R87 126

Queens Soliderate is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table.

Project A Project B

Initial investment (CF0) $130,000 $85,000

Year (t) Cash inflows (CFt)

1 $25,000 $40,000

2 35,000 35,000

3 45,000 30,000

4 50,000 10,000

5 55,000 5,000

a. Calculate the NPV of each project, and assess its acceptability. (1.5)

b. Calculate the IRR for each project, and assess its acceptability. (1.5)Required to answer. Single line text.

(3 Points)

A firm faces a 30 percent tax rate and has $500m in assets, currently financed entirely with equity. Equity is worth $100 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected EBIT is $60m. The firm is considering switching to a 25 percent debt capital structure, and has determined that they would have to pay a 10 percent yield on perpetual debt. How much will ROE change if they switch to the proposed capital structure?

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Multiple Choice

• There will be no change in the firm's ROE.
• The ROE will increase by 0.47 percent.
• The ROE will increase by 1.15 percent.

The ROE will increase by 0.82 percent.

Derek the contractor took out a loan to purchase lumber forone of his projects. He ended up 5328.85 in interestover an 11 month period it theaterestrate on the loan was9.5% how much dhe end up spending on lumber?What was the principal amount of the loan?