CUNY Bernard M Corporate Finance Time Value of Money questions

Below are 8 questions for a corporate Finance Class. Due due is 2/23/19 at 12 PM.

1. Find the annual interest rate. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Present Value Future Value Time Period Annual Interest Rate
$100 $126.25 4 years %
200 293.87 5 %
100 119.41 6 %

2.A zero-coupon bond that will pay $1,000 in 9 years is selling today for $424.10. What interest rate does the bond offer? (Do not round intermediate calculations. Enter your answer as a whole percent.)

Interest rate %

3. A famous quarterback just signed a contract for $13.6 million, providing $3.4 million a year for 4 years. A less famous receiver signed a contract for $12.6 million, providing $3 million now and $2.6 million a year for 4 years. The interest rate is 9%.

a. What is the PV of the quarterback’s contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the PV of the receiver’s contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

4.Calculate the present value of the following:

a-1. Annual payment of $825 for 12 years at 3% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2. Annual payment of $625 for 17 years at 3% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

9.You want to buy a new car, but you can make an initial payment of only $1,600 and can afford monthly payments of at most $750.

a. If the APR on auto loans is 12% and you finance the purchase over 48 months, what is the maximum price you can pay for the car? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. How much can you afford if you finance the purchase over 60 months? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

11. I now have $21,000 in the bank earning interest of .75% per month. I need $31,000 to make a down payment on a house. I can save an additional $100 per month. How long will it take me to accumulate the $31,000? (Do not round intermediate calculations. Round your answer to 2 decimal places. Use a financial calculator or Excel.)

Time Required: ______months

12. A retiree wants level consumption in real terms over a 25-year retirement. If the inflation rate equals the interest rate she earns on her $385,000 of savings, how much can she spend in real terms each year over the rest of her life?

Available real annual spending: ___________

13. Suppose that you will receive annual payments of $17,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present Value:___________