1. Midterm Preparation
3/2017
Dr. Sarina

2. 1. Assume you are to receive a 20-year annuity with annual payments of $500. The first payment will be received at the beginning of Year 1, and the last payment will be received at the beginning of Year 20. You will invest each payment in an account that pays 5 percent. What will be the value in your account at the end of Year 30?

3. 2. Calculate the present value of a perpetuity stream of cash flows that pays $200 starting at the end of Year 3 and the cash flows will grow at a rate of 10% per year indefinitely assuming the discount rate is 12%.

4. 3. Suppose Peter needs to give some advice to his friend regarding the housing loan. His friend has obtained the offers from the following three banks. Bank X: Interest rate is 18.00% per year compound quarterly Bank Y: Interest rate is 19.25% per year compound annually Bank Z: Interest rate is 17.80% per year compound monthly Which bank offered the lowest interest effectively?

5. 4. A potential buyer finds a piece of property that she believes is a good investment. She will need $100,000 mortgage to obtain the property. The lender informs her that such a mortgage will have a 10% interest rate, payable annually, and will be amortized over 30 years. How much is an annual loan payment for this mortgage?

6. 5. From prior question, how much is the ending loan balance after the buyer makes payment for 25 years.

7. 6. Suppose Ministry of Finance had issued bond named, TLOAN52/13/10Y, to pay the public debt in the amount of 25,000 million baht on 29 May, 2009 with maturity date on 29 May, The bonds carry a 3.875% coupon rate and pay interest semiannually. Assume the par value is 1,000 baht and investor’s required rate of return is 2.5% per year. What is the intrinsic value of this bond in baht on 29 May 2017?

8. 7. What is the yield to maturity of the bond if the price is 1,016
7. What is the yield to maturity of the bond if the price is 1, baht on 29 May 2017?

9. 8. Emerson’s preferred stock is selling at $54 on the market and pays an annual dividend of $4.20 per share. a. If an investor's required rate of return is 9%, what is the value of the stock for that investor? b. Considering the investor's required rate of return, does this stock seem to be a desirable investment?

10. 9.

11. a. Calculate and evaluate the firm’s asset management efficiency ratios for 2016.

12. b. At the end of year 2016, firm has 1,200 shares of common stock outstanding, selling for $20 each. What were the firm’s EPS, P/E and market to book ratio?