1. What is the future value in three years of $1000 invested in an account with a stated annual interest of 8%? Compounded annually? Compounded semiannually? Compounded quarterly? Also, what is the Effective Annual Rate (EAR) for each investment?
2.The government has issued a bond that will pay $1000 in 25 years. The bond will pay no interim coupon (interest) payments. What is the present value of the bond if the discount rate is 10%?
3.You have budgeted $450 per/month to purchase an automobile. You can obtain a 4-year new car loan for 12% (Annual Percentage Rate, APR). Assuming that you must finance the entire purchase price, what is the most that you can spend on the new car and stay within budget?
4.Today a firm signed a contract to sell a capital asset for $90,000. The firm will receive payment in 5 years and the asset costs $60,000 to produce. Is the firm making a profit on this item if the discount rate is 8%?
The textbook is Essentials of Corporate Finance 8th Edition
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