Questions from Corporate Finance

Q: A rich aunt has promised you $5000 one year from today

A rich aunt has promised you $5000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 3% larger than the last payme...

Q: You are thinking about buying a savings bond. The bond costs

You are thinking about buying a savings bond. The bond costs $50 today and will mature in 10 years with a value of $100. What annual interest rate will the bond earn?

Q: You have an investment account that started with $1000 ten years

You have an investment account that started with $1000 ten years ago and which now has grown to $5000. a. What annual rate of return have you earned (you have made no additional contributions to the a...

Q: You have an investment opportunity that requires an initial investment of $

You have an investment opportunity that requires an initial investment of $5000 today and will pay $6000 in one year. What is the rate of return of this opportunity?

Q: You have decided to buy a perpetual bond. The bond makes

You have decided to buy a perpetual bond. The bond makes one payment at the end of every year forever and has an interest rate of 5%. If the bond initially costs $1000, what is the payment every year?...

Q: You are thinking of purchasing a house. The house costs $

You are thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The b...

Q: You are thinking about buying a piece of art that costs $

You are thinking about buying a piece of art that costs $50,000. The art dealer is proposing the following deal: He will lend you the money, and you will repay the loan by making the same payment ever...

Q: What is the present value of $1000 paid at the end

What is the present value of $1000 paid at the end of each of the next 100 years if the interest rate is 7% per year?

Q: You would like to buy the house and take the mortgage described

You would like to buy the house and take the mortgage described in Problem 27. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow...

Q: Your grandmother has been putting $1000 into a savings account on

Your grandmother has been putting $1000 into a savings account on every birthday since your first (that is, when you turned one). The account pays an interest rate of 3%. How much money will be in the...