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Stocks, bonds options and futures calculation problems

1. How much will you have after 6 years if you invest $15,000 at 8% per year compounded annually? Quarterly?

2. How much you need to invest now at 8% interest rate compounded semiannually in order to have $10,000 in 5 years from now?

3. Find the present value of $12,000 due four years from now if rate of interest is 6.0% per year and compounded quarterly ?

4. What is the market value of a 60-day $5,000,000 commercial paper if rate of interest is 6.5% and compounded monthly?

4. You borrow $10,000 for one year with the nominal interest of 6.9% per year compounded monthly. You are required to pay the lender the principle and interest after one year. What is the APR of this loan if the lender charges $350 application and processing fee and you agree that $350 to be added to your loan? What is the APR if you withdraw $350.00 from your saving account, which pays 3.5%, and pay the charge up front?

5.Assume you buy a $5000 corporate bond with 6.0 percent coupon rate of $4850. This bond will mature in three years. If you hold the bond till maturity, what will be the yield to maturity? What is the bonds current yield? What is the average annual rate of return on investment?

6.The conversion ratio for XYZ convertible debenture is 20. You buy a $1000 of this bond at $100 premium. What is the parity price of XYZ stock?

Solution Preview

1. How much will you have after 6 years if you invest $15,000 at 8% per year compounded annually? Quarterly?

FV = PV (1+R)N where PV is the present value
R is the interest rate
N is the period

Annually

FV = 15,000(1.08)6
= 15,000(1.5869)
= 23,803.50

Quarterly

FV = 15,000(1.02)6x4
= 15,000(1.6804)
= 25,206

2. How much you need to invest now at 8% interest rate compounded semiannually in order to have $10,000 in 5 years from now?

FV = PV (1+R)N where PV is the present value
R is the interest rate
N is the period

10,000 = PV (1.04)5x2
10,000 = PV (1.4802)
PV = 6,755.84

3. Find the present value of $12,000 due four years from now if rate of interest is 6.0% per year and compounded quarterly?

12,000 = PV (1.015)4x4
12,000 = PV (1.2690)
PV = 9,456.26

4. What is the ...

Solution Summary

This solution is comprised of a detailed explanation to solve stocks, bonds options and futures calculation problems.

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