Directions: Answer the

following questions on a separate

document. Explain how you reached

the answer

or show your work if a mathematical calculation is needed, or

both. Submit

your assignment

using the

assignment link in the

course shell. This homework assignment

is worth

100 points.

Use the following

information for Questions 1 and

2:

Assume that you

are nearing

graduation and have applied for

a job

with a

local bank.

The bank’s

evaluation process requires you

to take

an examination

that covers

several financial analysis techniques. The first section of the

test asks

you to

address these discounted cash flow

analysis problems:

1. What

is the

present value of the following

uneven cash flow stream −$50,

$100, $75,

and $50

at the

end of Years 0

through 3? The appropriate interest

rate is

10%, compounded

annually.

2. Suppose that on January

1 you

deposit $100 in an account

that pays

a nominal

(or quoted)

interest rate of 11.33463%, with interest

added (compounded)

daily. How much will you

have in

your account

on October 1, or

9 months

later?

Use the following

information for Questions 3 and

4:

A firm issues

a 10-year,

$1,000 par value bond with

a 10%

annual coupon and a required

rate of

return is

10%.

3. What

is the

yield to

maturity on a 10-year, 9%

annual coupon, $1,000 par value

bond that

sells for

$887.00? That sells

for $1,134.20?

What does

a bond

selling at a discount or

at a

premium tell you

about the relationship between rd and the

bond’s coupon rate?

4. What are the total

return, the current yield, and

the capital

gains yield

for the

discount bond in Question #8 at

$887.00? At $1,134.20? (Assume the

bond is

held to

maturity and the company does

not default on the

bond.)

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University. All Rights Reserved. This document contains Strayer University

Confidential and Proprietary information and may not be copied, further

distributed, or otherwise disclosed in whole or in part, without the expressed

written permission of

Strayer University.

FIN 534 Homework Set #2 1156 (5-19-2015)

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