Mid-Term Exam | Complete Solution

Mid-Term Exam

1.       Calculate the present value of an investment given the following information: (a) Years: 10, (b) Rate: 9%, and (c) Future Value: $26,000.

2.       Calculate the future value of an investment given the following information: (a) Years: 5, (b) Rate: 6%, and (c) Present Value: $25,000.

3.       Calculate the rate of return on an investment given the following information: (a) Years: 21, (b) Present Value: $25,000, (c) Future Value: $125,000.

4.       Calculate the number of years on an investment given the following information: (a) Present Value: $12,000, (b) Future Value: $55,000, and Rate: 6%.

5.       Calculate the present value of an annuity due given the following information: (a) Years: 5, (b) Payment: $5,000, and Rate: 6%.

6.       Calculate the future value of an annuity given the following information: (a) Years: 10, (b) Payments: $15,000, and (c) Rate: 6%.

7.       Calculate the rate of return for the following annuity: (a) Present Value: $12,000, (b) Number of Years: 10, and (c) Payments: $1,235.

8.       Calculate the present value of an ordinary annuity with the following characteristics: (a) Payment: $5,500, (b) Number of Years: 9, and (c) Rate: 7.5%.

9.       Calculate the current price of a bond that has the following characteristic: (a) Coupon: $65, (b) Yield to Maturity: 5%, and Number of Years: 12.

10.   Calculate the current price of a bond that pays semi-annual coupon payments and has the following characteristics: (a) Number of Years until maturity: 10, (b) Annual Coupon Rate: 4.5%, and (c) Yield to Maturity: 4%.

11.   Is the bond from problem 10 selling at a (a) premium to par, (b) discount to par, or (a) at par value?

12.   Calculate the yield to maturity for a bond that has the following characteristics: (a) Coupon: $70, (b) Price: $986.00, and (c) Years until Maturity: 15.

13.   Calculate the price that you would be willing to pay for a ‘no growth’ stock that has the following characteristics: (a) Annual Dividend: $1.50 and (b) Investor’s required rate of return: 12.3%.

14.   Calculate the price that you would be willing to pay for a ‘constant growth’ stock that has the following characteristics: (a) Annual Dividend: $1.23, (b) Constant Growth Rate: 5.6%, and (c) Investor’s required rate of return: 6.5%.

15.   Calculate the price that you would be willing to pay for a ‘non-constant growth’ stock that has the following characteristics: (a) Non-Constant Growth Rate: 22.5% for 3 years, (b) Constant Growth Rate: 6%, (c) Last Dividend: $2.25, and (d) Investor’s Required Rate of Return: 11%.

16.   Calculate the price that you would be willing to pay for the following ‘non-constant growth’ stock that has the following characteristics: (a) Non-Constant Growth Rate: -5.67% for 3 years, (b) Constant Growth Rate: 6.10%, (c) Last Dividend: $2.35, and (d) Investor’s Required Rate of Return: 12.3%.

17.   Calculate the price that you would be willing to pay for a ‘constant growth stock’: (a) Next Year The Company will pay an Annual Dividend: $1.25, (b) Constant Growth Rate: 6.35%, and (c) Investor’s required rate of return: 9.63%.

18.   Calculate the dividend yield on a stock with the following information: (a) Growth Rate: 9%, (b) Price: $36.53, and (c) Dividend: $2.46.

19.   Calculate the current yield on the following bond: (a) Price: $856.00, (b) Market Rate of Interest: 7%, and (c) Coupon Rate: 6.5%.

20.   Calculate the difference in the future value of an investment that compounds at ‘annual’ and ‘daily’ interest rates with the following characteristics: (a) Present Value: $45,000, (b) Annual Interest Rate: 5.65%, and (c) Years to Maturity: 15.

21.   Calculate the investor’s required rate of return on a ‘constant growth’ stock with the following characteristics: (a) Price: $35.78, (b) Constant Growth: 7%, and (c) Dividend: $1.98.

22.   Calculate the investor’s required rate of return on a ‘no growth’ stock with the following characteristics: (a) Price: $45.98 and (b) Dividend: $3.78.

23.   Calculate the monthly payment required on a mortgage with the following characteristics: (a) Loan Value: $325,000, (b) Interest Rate: 4.25%, and (c) Years: 30.

24.   Calculate the capital gains yield on a stock that has the following characteristics: (a) The price that you purchased the stock for: $20.00, (b) The dividend on the stock: $2.50, and (c) The price that you sold the stock for: $24.50.

25.   I thank you for working so hard on this exam—the 25^th question is ‘extra credit’ for your effort—no response needed.