# FIN 534 – Homework Set #2

## FIN 534 – Homework Set #2

following questions on a separate
document. Explain how you reached
or show your work if a mathematical calculation is needed, or
both. Submit
using the
course shell. This homework assignment
is worth
100 points.

Use the following
information for Questions 1 and
2:

Assume that you
are nearing
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
you to
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
daily. How much will you
have in
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

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.) 