Financial Calculations: Present Value, Future Value, and Rate of Return
Chapter 5 Homework Problems
Problem 1: Present Value Calculation
Calculate the present value of $8,769 to be received in three years at a discount rate of 11.65%.
Problem 2: Future Value Calculation
Determine the future value of a $2,220 investment after 15 years with an annual interest rate of 4.8%, compounded annually.
Problem 3: Rate of Return Calculation
Find the annual rate of return for a project with an initial investment of $16,200 and a sale price of $23,800 after two years.
Problem 4: Future Value of Savings
Calculate the future value of annual savings of $4,000 with an average annual return of 7.5% over 25 years.
Problem 5: Present Value of Quarterly Payments
Determine the present value of quarterly payments of $100 for four years at a discount rate of 3.8%, compounded quarterly.
Problem 6: Monthly Loan Payment Calculation
Calculate the monthly payment needed to pay off $44,500 in student loans within five years at an interest rate of 6.5%, compounded monthly.
Problem 7: Present Value of Project Cash Flows
Find the present value of a project with cash flows of $5,000, $8,000, and $16,000 over three years at a discount rate of 15%.
Problem 8: Present Value of Cash Flows
Calculate the present value of cash flows of $1,200, $1,800, and $2,900 over three years at a discount rate of 9%.
Problem 9: Trust Fund Contribution
Determine the initial contribution to a trust fund that provides $225,000 in scholarships annually forever with a 4.63% rate of return.
Problem 10: Simple vs. Compound Interest
Calculate the difference in earnings between simple and compound interest on a $2,500 investment at 4% interest over five years.
Problem 12: Annual Percentage Rate (APR)
Find the APR for a credit card with an effective annual rate of 16.59%, compounded monthly.
Problem 13: Effective Annual Rate (EAR)
Calculate the effective annual rate for a loan with a 21% annual interest rate, compounded daily.
Problem 14: Future Value of Pure Discount Loan
Determine the repayment amount for a 6-year pure discount loan of $275,000 at 5.78% interest, compounded semiannually.
Problem 15: Present Value of Lump Sum Payment
Calculate the amount borrowed for a loan requiring a lump sum payment of $389,000 after 12 years at an interest rate of 6.5%, compounded monthly.
Problem 16: Present Value of Annuity Due
Find the present value of a five-period annuity due of $3,000 at an interest rate of 12%.
Chapter 7 Homework Problems
Problem 1: Stock Valuation with Constant Dividend Growth
Calculate the value of a stock with a $1.24 annual dividend, 2% annual dividend growth, and a required rate of return of 12%.
Problem 2: Stock Valuation with Constant Dividend
Determine the value of a stock with a $1.90 annual dividend and a required return of 11%.
Problem 3: Market Rate of Return
Find the market rate of return for a stock with a $1.42 annual dividend, 2.5% annual dividend growth, and a current price of $14.11.
Problem 4: Market Rate of Return with Dividend Growth
Calculate the market rate of return for a stock with a $2 dividend, 3% annual dividend growth, and a current price of $28.16.
Problem 5: Preferred Stock Valuation
Determine the maximum price to pay for a preferred stock with a $7.50 annual dividend and a desired rate of return of 12.25%.
Problem 6: Stock Valuation with Constant Growth
Calculate the current stock price with a $5.00 expected dividend, 4% constant growth rate, and a 16% discount rate.