Name:
FNCE 623: Week 2
I am including your week two assignment, here. This material comes from Chapter 5 & 6 of your textbook. You can turn this one completed word file into your week two assignment dropbox. Show your work right below each problem.
Assignment Guidelines:
1. Instructions: For this assignment is based on calculation with formulas and principles, you will do by adopting step by step method by word document.
2. This assignment has been done with the help of word document using tables.
3. This assignment is worth of 100 % of your Unit Exercise 2 % of Final Marks.
4. Clarity and neatness of your assignment is ensured.
5. Citation: The response uses additional reference materials where necessary and includes proper citations. The citations follow APA rules.
6. Formatting:
· Cover page: with your name, the title of the case, course, instructor, and submission date.
· Font style and size: Times New Roman 12 pt. Double spaced.
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Problem 1.
The company treasurer has to make a $5 Million payment on lawsuit in seven years. The company lost the lawsuit and the lawsuit has various repercussions for the company. The in house attorney has stated that the company needs to place the funds in a separate account. The treasurer has struck a deal with the company’s
okerage group. If the company places funds in the account, the
okerage will invest the funds in an instrument that guarantees the company a 3% annual compounded rate. The treasurer asks you to tell him how much money he needs to invest with the
okerage today so that after seven years the account will have the $5 Million in it.
Problem 2.
You are a stock
oker. You client wired $500,000 into her account five years ago. Today, five years later, your client asks you what annual return has she been earning on this
okerage account. The client has taken out no money and added no money to the account. The account has a $750,000 value today. The account has been invested in stocks and bonds and the
oker has made all the investments and has made a few trades per year. Question one: what compounded annual return has the client earned? Does this seem like a reasonable return? (second part no exact answer).
Problem 3.
You (stock
oker) bought Google stock for a client on the IPO date nine years ago today at the $85 IPO price. (Thus, the client has had the stock in her account for nine years). Today, the stock trades for $910 per share. What annual return has the investor earned from holding Google stock in his account. Here, we assume the stock has not paid any dividends. Part 2: would your client be satisfied with this investment (again no exact answer here for part 2 only).
Problem 4.
Your friend realizes you have been taking a finance course. He inherited $100,000 from his great aunt. He has uses for $75,000 of the funds. However, he plans on placing $25,000 in a savings account. One bank quoted him a 2.00% rate compounded quarterly and another bank quoted him a 1.975% rate compounded daily.
He has heard the term: effective annual interest rate (page 146 textbook). He asks you to compute the effective interest rate for these two choices and then tell him which one to choose?
Problem 5.
A particular investments generates the following cash flows: $5 Million end of year one; $5 Million end of year two; $5 Million end of year three; $7 Million end of year four; and $10 Million end of year five. (see figure 6.4 on page 131 for an example).
What is the future value of this investment if the investor earns 9% per year on all funds invested.
Reference :- Fundamentals of Corporate Finance 10th Edition Author: Stephen A. Ross (Text book )