Homework 3-Financial Statement, taxation, and time value of money

Financial Statement, taxation, and time value of money

Time Value of Money, Annuity and Amortization

1. (a)Suppose you want to invest in a capital that is worth $40,000 and discounted to the present at 5%; what will be the present value of the capital if you are required to make monthly payments of $400 at the start of each month for 5 years?     (5 Points)
2. Your firm has been given a loan of $250,000 at 4% to construction of a new plant in six years. If payments are to be made at the start of each month, what will be the monthly payment?(3 Points) What will be the amount of principal paid at the end of the second year? (3 Points)

What is the interest payment at the end of the second year? (2 Points)

What is the remaining balance after the second year? (2 Points)

                                                    Chapter 7 Risk and Return

 

3. 3. Suppose you purchase an asset for $4,000 and eventually sold it for $4500; what is the holding period return if you received no cash inflow?(2 Points). Alternatively, what will be your total holding period return if you had received $20 dollars in cash flow?(2 points)

4. 4. Investments in three financial assets have the following probabilities: stocks; 0.2; corporate bonds, 0.3; and Treasury bonds 0.5. Suppose you invest $3000 in stocks, $2500 in corporate bonds, and $1000 in Treasury bonds; what will be your expected return?(3 points)

What is the risk/uncertainty (standard deviation) that is associated with the sum of your investment decisions?  (10 Points)