Purchase Solution

Rate of Return and Future Value

Not what you're looking for?

Ask Custom Question

You have just purchased a 10 year $1000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each six months. If you expect to earn 10 percent simple rate of return on this bond how much did you pay for it?

You expect to receive $1000 at the end of each of the next three years. You will deposit these payments into an account which pays 10 percent compounded semiannually. What is the future value of these payments, that is, the value at the end of the third year?

Purchase this Solution
Solution Summary

Rate of Return & Future Value are calculated in the case.

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
Recent Feedback
  • "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
  • "thank you!"
  • "Thank you again Jayant. You are super fast. "
  • "Thank you Jayant. You are appreciated. "
  • "Again, thank you Jayant. You are wonderful. "
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Future value of stock expected at end of year two

    Stock currently sells for 35.02 a share, the market required rate of return is 17%, the beta is 0.10, and the risk-free rate of return is 3.3%.

  • Calculating future values and rates of return

    Present value of investment=PV=$8000 Future Value of investment=FV=$12,500 Number of periods=n=5 Rate of return=r=(FV/PV)^(1/n)-1=(12500/8000)^(1/5)-1=9.34% - Assuming the growth occurred in six years and then eight years, recalculate the rate of

  • Present vs. Future Value in a Retirement Plan

    increasing rate of return on present value From table 2, you will observe that as the rate of return increases then the present value decreases.

  • Capital budgeting Practice True False Exam Questions

    Internal rate of return is a method of calculating the expected gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.

  • Multiple Choice Questions on Time Value of Money, Stocks

    130281 Multiple Choice Questions on Time Value of Money, Stocks: present value, required rate of return, interest rates, risk adjusted required rate of return, P/E ratio, 1) The present value of a dollar: Increases as the interest rate increases.

  • Auditing

    460273 Time value of money concepts: Return on investment, rate of return, NPV method, capital budgeting What are three reasons that cash is worth more today than cash to be received in the future? Define the term return on investment.

  • techniques to evaluate investments

    Internal rate of return: Internal rate of return is the discount rate at which the present value of cash inflows is equivalent to the present value of cash outflows.

  • Discounting rate

    Future cash flows are discounted based on the desired rate of return back to their present value. This is done in order to compare "apples to apples," because a dollar today is worth more than a dollar in the future.

  • IRR

    In other words, if you calculate the future value of the intermediate cash flows to the end of the project at the required return, sum the future values, and calculate the internal rate of return of the two cash flows, you will get the same internal rate

  • Bond, Yield to Maturity and Coupon Interest Rate

    Present value of $1 b. Future value of $1 c. Present value of an annuity of $1 d. Future value of an annuity of $1 3. Which of the following is not one of the components that makes up the required rate of return on a bond?

View More Related Solutions