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Annual compounding, what is the price of a 5 percent coupon bond with 10 years left to maturity and a ma
rket interest rate of 7.2 percent? Assume that interest payments are paid semi-annually and that par value i
s $1000.
1. Having an issue coming up with an excel formula that works.

By extracting the information:

Par value of the bond (FV) = $1,000
Time to maturity (N) = 10 years
Coupon rate (Cr) = 5%
Yield to maturity(r) = 7.2%
Compounding semi-annually (m) = 2
Calculate the price of the bond:
The formula for calculating the price of the bond is given below:
Bond value = FV{1/(1+r/m)mN + (Cr/r) (1-(1+r/m)-mN)}
By substituting the values:
Bond value = $1,000 {1/(1+0.072/2) 2x10 + (0.05/0.072) (1-(1+0.072/2)-2x10)}
= $1,000 x 0.8450
= $845.07

Thus, the price of the bond is $845.07

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PV (rate, nper,pymt,fv,type) interest payments Rate semi-annual 7.2% /2  =3.6% Nper semi-annual
periods  20 Pmt semi-annual $1000 x 5%/2 = 25 Fv 0 Type 0 
1. Using semi-annual compounding, what is the price of a 5 percent coupon bond with 10 years left to
maturity and a market interest rate of 7.2 percent? Assume that interest payments are paid semi-annually and
that par value is $1000.
I need help with an actual formula that works in excel.  Mine does not work

Rate Nper Pmt Fv

3.60% 20 25 0

By extracting the information:

Par value of the bond (FV) = $1,000
Time to maturity (N) = 10 years
Coupon rate (Cr) = 5%
Yield to maturity(r) = 7.2%
Compounding semi-annually (m) = 2
Calculate the price of the bond:
The formula for calculating the price of the bond is given below:
Bond value = FV{1/(1+r/m)mN + (Cr/r) (1-(1+r/m)-mN)}
By substituting the values:
Bond value = $1,000 {1/(1+0.072/2) 2x10 + (0.05/0.072) (1-(1+0.072/2)-2x10)}
= $1,000 x 0.8450
= $845.07

Thus, the price of the bond is $845.07

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In 1895, the first Putting Green Championship was held. The winner's prize money was $160. In 2014, the winner's check was

What was the percentage increase per year in the winner's check over this perio

By extracting the information:

Present value = $160

Future value = $1,360,000

Time to maturity = 119 years (from 1895 to 2014)

Calculate the percentage increase per year:

The formula for calculating the rate of return is given below:

Rate of return = (FV / PV)(1/t) – 1

By substituting the values:

Rate of return = ($1,360,000 / $160) (1/119) – 1

= 0.0790

Thus the rate of return is 7.9%

Calculate the future price if the increase is 7.9%:

By extracting the information:

Present Value = $1,360,000
Number of years = 25 (From 2014 to 2039)
Interest rate = 7.9% compounded annually
Calculate the future value amount:
To calculate the Future value the formula is as follows:
Future value = Present value (1 + r)n
By substituting the values:
Future value = $1,360,000 (1 + 0.079)25
= $1,360,000 x 6.691694676

= $9,100,704.76

Thus, the future value is $9,100,704.76

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A stock is trading at $ 44 .00 per share. The stock is expected to have a year-end dividend of $ 3.1 0
per share (D1), which is expected to grow at some constant rate g throughout time. The stock's
required rate of return is 12 percent. If you are an analyst who believes in efficient markets, what is
your forecast of g?

By extracting the information:

Annual dividend per share = $3.10

Trading price of the stock = $44

Required rate of return = 12%

Calculate the implied growth rate of dividend:

The formula for calculating the dividend growth rate is as follows:

k = (D/S) + g

g = k – (D/S)

Where,

The required rate of return is k

The dividend payment is D

The current stock value is S

The dividend growth rate is g

By substituting the values:

g = 0.12 – ($3.10/$44)

= 0.12 – 0.07045454

= 0.04954545

Thus, the dividend growth rate is 5.0

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Columbus Manufacturing's stock currently sells for $ 23.64 a share. The stock just paid a dividend of
$2 a share (i.e.,D0=2). The dividend is expected to grow at a constant rate of 3 % a year. What is the
required rate of return on the company's stock? Express your answer in percentage, and round it to
two decimal places, i.e.,13.54, for example for 0.1354)

By extracting the information:

Stock price = $23.64 per share

Expected dividend = $2 per share

Dividend growth rate = 3%

Calculate the required rate of return:

The formula for calculating the required rate of return is as follows:

r = (D/S) + g

Where,

The required rate of return is r

The dividend payment is D

The current stock value is S

The dividend growth rate is g

By substituting the values:

r = ($2 / $23.64) + 3%

= 0.08460 + 0.03

= 0.1146

Thus, the required rate of return is 11.46%

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Although appealing to more refined tastes, art as a collectible has not always performed so
profitably. During 2003, an auction house sold a sculpture at auction for a price of $10,301,500.
Unfortunately for the previous owner, he had purchased it in 2000 at a price of $12,357,500.

By extracting the information:

Present value = $12,357,500

Future value = $10,301,500

Time to maturity = 3 years (from 2000 to 2003)

Calculate the percentage increase per year:

The formula for calculating the rate of return is given below:

Annual rate of return = (FV / PV)(1/t) – 1

By substituting the values:

Annual rate of return = ($10,301,500 / $12,357,500) (1/3) – 1

= 0.941145165-1

= -0.05885

Thus the rate of return is -5.89%

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Lisa Simpson wants to have $1 700 000
in 55 years by making equal annual end-of-the-year deposits into a tax-deferred account paying 11.50
percent annually. What must Lisa's annual deposit be?
Future value of ordinary annuity:
The future value of an ordinary annuity is defined as measurement of the amount obtained in
some future time when the specified rate of return is given. If the rate of return is high, then the
value annuity will also be higher because the annuity will grow at the required rate of return.
When payments are made at the end it is known as ordinary annuity.
By extracting the information:
Future value = $1,700,000
Number of years = 55
Interest rate = 11.50% compounded monthly
Compounding periods = 1
Calculate the payment amount:
To calculate the Payment at the end of every year the formula is as follows:
Payment = Future value/ [((1 + r/1) nx1 - 1) / r/12
By substituting the values:
Payment = $1,700,000/ [((1 + 0.115/1) 55x1 - 1) / 0.115/1]
= $ 1,700,000 / 3,454.04420
= $492.18
Thus, the payment amount is $492.18

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Question 10-1: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year
for 7 years, and a cost of capital of 11%. What is the project's NPV? (Hint: Begin by constructing a
time line.)
By extracting the information:

The cost of capital = 11%

The below spread sheet shows the calculation of NPV using NPV function:

Cost of capital 11.00%              

Time line 0 1 2 3 4 5 6 7
Cash flow ($40,000) $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000
NPV of cash flows
from time period $42,409.77          
1 to 7    
NPV of cash flows
(Cash outflow - $2,409.77          
Cash inflow)    

Thus, the net present value of the cash flows is $2,409.77

The formula of NPV of cash flows is as follows:

NPV = -C0 +(C1/(1+r)) + C2/(1+r)2) ….+ ….Cn/(1+r)t)

Where,

The initial cash flow = C0

The discount rate = r

The time period = t

By substituting the values:

NPV = -$40,000 + ($9,000/(1+0.11)1) + ($9,000/(1+0.11)2)+ ………..+ ($9,000/(1+0.11)7)

= $2,409.77

Thus, the net present value is 2,409.77

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What lump sum deposited today at 8% compounded quarterly for 10 years will yield the same final
amount as deposits of $4000 at the end of each 6 month period for 10 years at 4% compounded
semiannually?
The value of the lump sum is.
Future value of ordinary annuity:
The future value of an ordinary annuity is defined as measurement of the amount obtained in
some future time when the specified rate of return is given. If the rate of return is high, then the
value annuity will also be higher because the annuity will grow at the required rate of return.
When payments are made at the end it is known as ordinary annuity.
Step-1:
By extracting the information:
Payment at year end = $4,000
Number of years = 10
Interest rate = 4% compounded semi-annually
Compounding period (m) = 2
Calculate the Future value amount:
To calculate the Future value the formula is as follows:
Future value = Payment x [((1 + r/1) nx1 - 1) / r/1]
By substituting the values:
Future value = $4,000 x [((1 + 0.04/2) 10x2 - 1) / 0.04/2]
= $4,000 x 24.29736

= $97,189.48

Thus, the future value is $97,189.48

Step-2:
By extracting the information:
FV = $97,189.48
Number of years = 10
Interest rate = 8% compounded quarterly
Calculate the amount required to be deposited today:
To calculate the present value the formula is as follows:
Present value = Future value / (1 + r/4 )nx4
By substituting the values:
Present value = $97,189.48 / (1 + 0.08/4)10x4
= $97,189.48 / 2.2080396
= $ 44,016.18
Thus the present value is $44,016.18

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A facility has an issue of 18 year old $1000 par value bonds that pay 7% interest, assume today's
required rate of return on these bonds is 5%, how much would these bonds sell for today?

By extracting the information:

Par value of the bond (FV) = $1,000
Time to maturity (N) = 18 years
Coupon rate (Cr) = 7%
Yield to maturity(r) = 5%
Compounding semi-annually (m) = 1
Calculate the selling price of the bond:
The formula for calculating the price of the bond is given below:
Bond value = FV{1/(1+r/m)mN + (Cr/r) (1-(1+r/m)-mN)}
By substituting the values:
Bond value = $1,000 {1/(1+0.05/1)18x1 + (0.07/0.05) (1-(1+0.05/1)-18x1)}
= $1,000 x 1.2337917
= $1,233.79

Thus, the selling price of the bond is $1,233.79

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Perez Rivera Manufacturing is expected to pay a dividend of $1.50 per share at the end of the year
(D1 = $1.50). The stock sells for $34.50 per share, and its required rate of return is 11.5%. The
dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected
growth rate?

By extracting the information:

Annual dividend per share = $1.50

Selling price of the stock = $34.50

Required rate of return = 11.5%

Calculate the implied growth rate of dividend:

The formula for calculating the dividend growth rate is as follows:

k = (D/S) + g

g = k – (D/S)

Where,

The required rate of return is k

The dividend payment is D

The current stock value is S

The dividend growth rate is g

By substituting the values:

g = 0.115 – ($1.50/$34.50)

= 0.115 – 0.04347826

= 0.0715

Thus, the dividend growth rate is 7.15%

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tocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is
6.4%. According to Capital Asset Pricing Model (CAPM), which of the following statements is
CORRECT?

By extracting the information:

Beta of stock A = 1.10

Beta of stock B = 0.90

Market risk premium for both the stocks = 6.0%

Risk free rate for both the stocks = 6.4%

Calculate the expected return of stock A and stock B:

The formula for required rate of return is as follows:

Expected return = Risk free rate + Beta of security (Expected market return – Risk free rate)

Expected return = Risk free rate + Beta of security (Market risk premium)

By substituting the values:

Stock A:

Expected return = 6.4% + 1.10 (6%)

= 0.064+ (1.10 x 0.06)

= 0.13

Thus, the required rate of return of stock A is 13%

Stock B:

Expected return = 6.4% + 0.90 (6%)

= 0.064+ (1.10 x 0.06)

= 0.118

Thus, the required rate of return of stock A is 11.8%

Therefore, it can been seen that the expected rate of return of stock A is 13% which is higher
than the expected return of stock B, 11.8%

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If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $50, what is the stock's expected dividend
yield for the coming year?

By extracting the information:

Annual dividend per share = $2.25

Closing price = $50

Dividend growth = 3.5%

Calculate expected dividend yield:

The formula for expected dividend yield is as follows:

Dividend yield = Annual dividend for next year / Current stock price

Dividend yield = (Current annual dividend x (1+g))/ Current stock price

By substituting the values:

Dividend yield = ($2.25 x(1+0.035))/$50

= 2.32875/$50

= 0.0466

Thus, the dividend yield is 4.66%

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The credit balance shows decrease in the asset is shown by the below example:
A company pays $50,000 for a new equipment. The journal entry will be as follows:
Dr. Machinery account $50,000
Cr. Cash $50,000
This implies that the balance of machinery account will be increased by $50,000, and on the
other hand the asset cash will be decreased by $50,000.

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Staci invested $950 five years ago.  Her investment paid 7.2 percent interest compounded monthly. 
Staci's twin sister Shelli invested $900 at the same time.  But Shelli's investment 8 percent interest
compounded quarterly.  How much is each investment worth today?

By extracting the information:

Staci investment:
Present value = $950
Time to maturity = 5
Interest rate = 7.2% compounded monthly
Compounding period (m) = 12
Shelli investment:
Present value = $900
Time to maturity = 5
Interest rate = 8% compounded quarterly
Compounding period (m) = 4
Calculate the investments worth today (Future value):
To calculate the Future value the formula is as follows:
Future value = Present value (1 + r/m)nxm
By substituting the values:
Staci:
Future value = $950 (1 + 0.072/12)5x12
= $950 x 1.43178841

= $1,360.20

Thus, Staci’s investment worth today is $1,360.20

Shelli:
Future value = $900 (1 + 0.08/4)5x4
= $900 x 1.485947395

= $1,337.35

Thus, Shelli’s investment worth today is $1,337.35

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What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20
years. Assume all payments are made at the end of the period. (Please provide full formula and
logic) 

Future value of ordinary annuity:

The future value of an ordinary annuity is defined as measurement of the amount obtained in
some future time when the specified rate of return is given. If the rate of return is high, then the
value annuity will also be higher because the annuity will grow at the required rate of return.
When payments are made at the end it is known as ordinary annuity.
By extracting the information:
Payment at year end = $10,000
Number of years = 200
Future value = $400,000
Calculate the Future value amount:
To calculate the Future value the formula is as follows:
Future value = Payment x [((1 + r) n - 1) / r]
By substituting the values:
$400,000 = $10,000 x [((1 + r) 20 - 1) / r]
r = 6.78%
Thus, the required rate of return is 6.78%

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Essary Enterprises has bonds on the market making annual payments, with eleven years to
maturity, a par value of $1,000, and selling for $982. At this price, the bonds yield 7.6 percent.
What must the coupon rate be on the bonds?
By extracting the information:
Market price of bond = $982
Par value of the bond = $1,000
Yield to maturity = 7.6%
Years to maturity = 11
compounding period (m) = 1
Calculate the yield to maturity:
Step-1:
The formula for calculating Coupon payment is as follows:
YTM = [C+(F-P)/n] /[ (F+P)/2]
C = [YTM x ((F+P)/2)] –((F-P)/n)
Where,
The interest payments is C
The face value is F
The price is P
The years to maturity is n
By substituting the values:
C = [0.076 x (($1,000+$982)/2)] - (($1,000-$982)/11)

= $73.6796
Thus, the coupon payment is $73.68
Step-2:
To calculate coupon rate the formula is as follows:
Coupon rate = Coupon payment /Par value
By substituting the values:
Coupon rate = $73.68/$1,000
= 0.0737
Thus, the coupon rate is 7.37%

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You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year
mortgage loan for 80 percent of the $2,900,000 purchase price. The monthly payment on this loan
will be $14,900. What is the APR on this loan? What is the EAR on this loan?

Present value of ordinary annuity:

The present value of ordinary annuity is defined as series of equal payments which occur at the end of
every period at regular intervals. The payments which are made at the end of every period is known as
ordinary annuity or annuity in arrears. The present value of ordinary annuity involves compounding
which implies that the interest which is earned is invested again and the interest earned in future will be
at the same rate as the principal amount.

By extracting the information:

Purchase price of equipment (Present value) = $2,900,000
Loan period (t) = 30 year
Monthly payments = $14,900
Calculate the APR and the effective annual rate on loan:
Step-1:
To calculate the loan amount the formula is as follows:
Loan amount (Present value) = 80% of Purchase price of equipment
By substituting the values:
Loan amount (Present value) = 80% x $2,900,000
= $2,320,000
Thus, the loan amount is $2,320,000

Step-2:
To calculate the Present value the formula is as follows:
Payment =Present value of annuity/ {C({1 − [1 / (1 + r)t]} ]/ r)}
By substituting the values:
$14,900= $2,320,000 / ({1 − [1 / (1 + r)30]} ]/ (r))}
r =0.05000005

Thus, APR is 5%

To calculate the effective annual rate the formula is given below:

Effective annual rate = {1+ (APR/m)} m – 1

By substituting the values:

Effective annual rate = {1+ (0.05)} – 1

= 0.05

Thus, the effective annual rate is 5%

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I am trying to compute a monthly payments on the problem presented:
BANK A                                        BANK B
p $33,516.17                                  P $33,516.17
RATE 0.07 ,                                   RATE 0.02
TERM 5 YEARS                           TERM 6 YEARS
=
Present value of ordinary annuity:

The present value of ordinary annuity is defined as series of equal payments which occur at the end of
every period at regular intervals. The payments which are made at the end of every period is known as
ordinary annuity or annuity in arrears. The present value of ordinary annuity involves compounding
which implies that the interest which is earned is invested again and the interest earned in future will be
at the same rate as the principal amount.

By extracting the information:

Bank A:
Present value = $33,516.17
Rate = 0.07
Term to maturity = 5
Bank B:
Present value = $33,516.17
Rate = 0.02
Term to maturity = 6

Calculate the monthly payments:

To calculate the payment the formula is as follows:
Payment =Present value of annuity/ {C({1 − [1 / (1 + r)t]} ]/ r)}
By substituting the values:
Bank A:
Payment = $33,516.17 / ({1 − [1 / (1 + 0.07/12)5x12]}]/ (0.07/12))}
= $33,516.17/ 50.50199

= $663.66

Thus, the monthly payment Bank A is $663.66

Bank B:
Payment = $33,516.17 / ({1 − [1 / (1 + 0.02/12)6x12]}]/ (0.02/12))}
= $33,516.17/ 67.794579

= $494.38

Thus, the monthly payment is $494.38