Question: Zip Boys has outstanding zero coupon bonds

> You deposit $10,000 at the end of each of the next four years into an account that pays 12 percent annually. What is the account balance at the end of 10 years?

> You deposit $4,500 per year at the end of each of the next 25 years into an account that pays 10 percent compounded annually. How much could you withdraw at the end of each of the 20 years following your last deposit? (The 25th and last deposit is made a

> Upon retirement, your goal is to spend five years traveling around the world. To travel in the style to which you are accustomed will require $250,000 per year at the beginning of each year. If you plan to retire in 30 years, what are the equal, annual,

> Mitchell Investments has offered you the following investment opportunity: $6,000 at the end of each year for the first 5 years, plus $3,000 at the end of each year from years 6 through 10, plus $2,000 at the end of each year from years 11 through 20.

> Construct a loan amortization schedule for a 3-year, 11 percent loan of $30,000. The loan requires three equal, end-of-year payments

> Strikler, Inc., has issued a $10 million, 10-year bond issue. The bonds require Strikler to establish a sinking fund and make 10 equal, end-of-year deposits into the fund. These deposits will earn 8 percent annually, and the sinking fund should have enou

> Your mother is planning to retire this year. Her firm has offered her a lump-sum retirement payment of $50,000 or a $6,000 lifetime annuity—whichever she chooses. Your mother is in reasonably good health and expects to live for at least 15 more years. Wh

> Under what conditions will a bond’s current yield be equal to its yield-to-maturity?

> Your parents have discovered a $1,000 bond at the bottom of their safe-deposit box. The bond was given to you by your late great-aunt Hilda on your second birthday. The bond pays interest at a rate of 5 percent per annum, compounded annually. Interest ac

> Williams Oil Company had a return on stockholders’ equity of 18 percent during 2016. Its total asset turnover was 1.0 times, and its equity multiplier was 2.0 times. Calculate the company’s net profit margin.

> You are considering investing in a bond that matures 20 years from now. It pays an annual end-of-year coupon rate of interest of 8.75 percent, or $87.50 per year. The bond currently sells for $919. Your marginal income tax rate (applied to interest payme

> An investment promises to pay $6,000 at the end of each year for the next five years and $4,000 at the end of each year for years 6 through 10. a. If you require a 12 percent rate of return on an investment of this sort, what is the maximum amount you wo

> You decide to purchase a building for $30,000 by paying $5,000 down and assuming a mortgage of $25,000. The bank offers you a 15-year mortgage requiring annual end-of-year payments of $3,188 each. The bank also requires you to pay a 3 percent loan origin

> Your great-uncle Claude is 82 years old. Over the years, he has accumulated savings of $80,000. He estimates that he will live another 10 years at the most and wants to spend his savings by then. (If he lives longer than that, he figures you will be happ

> Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives options and e

> A life insurance company offers loans to its policyholders against the cash value of their policies at a (nominal) annual interest rate of 8 percent, compounded quarterly. Determine the effective annual percentage interest rate on these loans.

> What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return? a. 5 percent b. 7 percent c. 12 percent (Note: At maturity, the bo

> Susan Robinson is planning for her retirement. She is 30 years old today and would like to have $600,000 when she turns 55. She estimates that she will be able to earn a 9 percent rate of return on her retirement investments over time; she wants to set a

> A firm purchases 100 acres of land for $200,000 and agrees to remit 20 equal annual end-of-year installments of $41,067 each. What is the true annual interest rate on this loan?

> How does the yield-to-maturity on a bond differ from the coupon yield or current yield?

> Explain what is meant by reinvestment rate risk.

> Mr. Jones bought a building for $60,000, payable on the following terms: a $10,000 down payment and 25 equal annual installment payments to include principal and interest of 10 percent per annum. Calculate the amount of the installment payments. How much

> What is the present value of $800 to be received at the end of eight years, assuming the following annual interest rate? a. 4 percent, discounted annually b. 8 percent, discounted annually c. 20 percent, discounted quarterly d. 0 percent

> A leading broker has advertised money multiplier certificates that will triple your money in nine years; that is, if you buy one for $333.33 today, it will pay you $1,000 at the end of nine years. What rate of return will you earn on these money multipli

> Determine the present value, discounted at 6 percent per year of $50,000 to be received five years from today if the interest rate is compounded: a. Semiannually b. Quarterly

> The Mutual Assurance and Life Company is offering an insurance policy under either of the following two terms: a. Make a series of twelve $1,200 payments at the beginning of each of the next 12 years (the first payment being made today). b. Make a sing

> The Lancer Leasing Company has agreed to lease a hydraulic trencher to the Chavez Excavation Company for $20,000 a year over the next eight years. Lease payments are to be made at the beginning of each year. Assuming that Lancer invests these payments at

> If you require a 9 percent return on your investments, which would you prefer? a. $5,000 today b. $15,000 five years from today c. $1,000 per year for 15 years

> How much will $1,000 deposited in a savings account earning a compound annual interest rate of 6 percent be worth at the end of the following number of years? a. 3 years b. 5 years c. 10 years

> Assume that you are 30 years old today and expect to retire when you reach age 65. If you were to retire today, you would like a fixed (pretax) income of $60,000 per year (in addition to Social Security) for a period of 15 years (your approximate life ex

> What is the relationship between the concepts of net present value and shareholder wealth maximization?

> Clovis Industries had sales in 2016 of $40 million, 20 percent of which were cash. If Clovis normally carries 45 days of credit sales in accounts receivable, what are its average accounts receivable balances? (Assume a 365-day year.)

> Describe the relationship between the coupon rate and the required rate of return that will result in a bond selling at a. A discount b. Par value c. A premium

> Evaluate the following statement: “The development of powerful, inexpensive microcomputers has made the hand calculator as obsolete as the slide rule.”

> Explain how to determine the present value of an uneven cash flow stream.

> Give an example of a perpetuity. How does a perpetuity differ from an annuity?

> A savings account advertises that “interest is compounded continuously and paid quarterly.” What does this mean?

> November 21, 1980, was the day of a tragic fire in the MGM Grand Hotel in Las Vegas. At the time of the fire, the hotel had only $30 million of liability insurance. One month after the fire, the hotel bought an extra $170 million of liability coverage fo

> Describe how to set up a loan amortization schedule.

> Explain how future value of an annuity interest factors can be used to solve a sinking fund problem.

> If the required rate of return increases, what is the impact on the following? a. A present value of an annuity b. A future value of an annuity

> What is the difference between an ordinary annuity and an annuity due? Give examples of each.

> Pacific Fixtures lists the following accounts as part of its balance sheet. Total assets………………………………………………………………$10,000,000 Accounts payable………………………...……………………………...$ 2,000,000 Notes payable (8%)…………….…………...……………………………...1,000,000 Bonds (10%)………………………

> What is the relationship between present value and future value?

> What is the primary difference between the book value and the market value of an asset?

> Murphy’s Brewhouse was a rapidly expanding chain of home-brew bars. The beer was not very good, but hopes were high when the company went public three years ago, because of founder/owner Kevin Murphy’s promotional skills. At the time the company went pub

> Disney Enterprises issued 7.55% senior debentures (bonds) on July 15, 1993, with a 100-year maturity (that is, due on July 15, 2093). Suppose an investor purchased one of these bonds on July 15, 2003 for $1,050. a. Determine the yield-to-maturity (neare

> Hexcel has a 7 percent coupon rate bond issue outstanding that matures in 2017. The Wall Street Journal reports a bond price of $582.50. These bonds are convertible into common stock. Why do you think a company would issue this type of bond?

> The bonds of Columbia Gas paid no interest in 1993 because the firm had declared bankruptcy. One issue of these bonds, the 8¼ percent coupon bonds due in 1996, was selling at 109 percent of par value, or for approximately $1,090. Why would someone pay $1

> How much would you have to pay for a U.S. government bond ($1,000 maturity value) scheduled to mature in November 2017 and quoted at 147:27 “asked”? The coupon rate on the bond is 9⅞ percent.

> Explain the Rule of 72. How can it be used in finance applications?

> The “asked” discount on a six-month Treasury bill was recently quoted as 3.02 percent. Approximately how much would you have to pay to buy one of these Treasury bills ($10,000 maturity value)?

> Vanity Press, Inc., has annual credit sales of $1.6 million and a gross profit margin of 35 percent. a. If the firm wishes to maintain an average collection period of 50 days, what level of accounts receivable should it carry? (Assume a 365-day year.)

> Define the following: a. The market value of an asset b. Market equilibrium

> Data from a poll of working women conducted in 2016 by Gallup led to the following estimates: Approximately 48% of working women are actively looking for a different job and 60% of working women rate greater work-life balance and well-being as a very imp

> Consider the population that consists of all people who purchased season tickets for home games of the New York Yankees. a. Give an example of a question about this population that could be answered by collecting data and using the data to estimate a po

> The article “Display of health risk behaviors on mySpace by adolescents” (Archives of Pediatrics and Adolescent Medicine [2009]: 27–34) describes a study of 500 publically accessible MySpace Web profiles posted by 18-yearolds. The content of each profile

> Are people willing to eat blemished produce? An article that described the result of a survey of 2025 adult Americans was titled “eight in ten americans Say appearance is at Least Somewhat important when Shopping for fresh Produce” (www .theharrispoll.co

> Should advertisers worry about people with digital video recorders (DVRs) fast-forwarding through their TV commercials? Recent studies by MillwardBrown and Innerscope Research indicate that when people are fast-forwarding through commercials they are act

> Can moving their hands help children learn math? This question was investigated by the authors of the paper “gesturing gives children new ideas about math” (Psychological Science [2009]: 267–272). A s

> Refer to the instructions prior to Exercise 7.25. “Spending on favorite Drinks” is the title of a graph that appeared as part of the USA Snapshot series in the newspaper USA TODAY (November 4, 2016). This graph summari

> In a study of whether taking a garlic supplement reduces the risk of getting a cold, 146 participants were assigned to either a garlic supplement group or to a group that did not take a garlic supplement (“garlic for the common cold,&ac

> An article in USA TODAY (October 19, 2010) described a study to investigate how young children learn. Sixty-four toddlers age 18 months participated in the study. The toddlers were allowed to play in a lab equipped with toys and which had a robot that wa

> Refer to the instructions prior to this exercise. The concept of a “phantom smoker” was introduced in the paper “i Smoke but i am not a Smoker: Phantom Smokers and the Discrepancy between Self-identit

> Researchers at the Medical College of Wisconsin studied 2121 children between the ages of 1 and 4 (Milwaukee Journal Sentinel, November 26, 2005). For each child in the study, a measure of iron deficiency and the length of time the child was bottle-fed w

> Common Sense Media surveyed 1000 teens and 1000 parents of teens to learn about how teens are using social networking sites such as Facebook and MySpace (“teens Show, tell too much online,” San Francisco Chronicle, aug

> Refer to the instructions prior to this exercise. A study of fast-food intake is described in the paper “what People buy from fast-food restaurants” (Obesity [2009]: 1369–1374). Adult customers at three hamburger chains (McDonald’s, Burger King, and Wend

> Consider the four key questions that guide the choice of an inference method. Two of these questions are Q: Question type. Estimation or hypothesis testing? S: Study type. Sample data or experiment data? What are the other two questions that make up

> Comment on the following statement: The same statistical inference methods are used for learning from categorical data and for learning from numerical data.

> Suppose that a study is carried out in which each student in a random sample selected from students at a particular college is asked whether or not he or she would purchase a recycled paper product even if it cost more than the same product that was not

> The article “arctic Sea ice is Slipping away—and You’re to blame” (USA TODAY, November 4, 2016) describes a study that appeared in the journal Science. In this study, researchers loo

> Do children diagnosed with attention deficit/hyperactivity disorder (ADHD) have smaller brains than children without this condition? This question was the topic of a research study described in the paper “Developmental trajectories of b

> Refer to the instructions prior to this exercise. The article “Smartphone nation” (AARP Bulletin, September 2009) describes a study of how people ages 50 to 64 years use cell phones. In this study, each person in a sam

> Consider the four key questions that guide the choice of an inference method. Two of these questions are T: Type of data. One variable or two? Categorical or numerical? N: Number of samples or treatments. How many samples or treatments? What are the

> When you collect data to learn about a population, why do you worry about whether the data collected are categorical or numerical?

> Suppose that a study was carried out in which each person in a random sample of students at a particular college was asked how much money he or she spent on textbooks for the current semester. Would you use these data to estimate a population mean or to

> For the study described in the previous exercise, answer the following questions. a. What is the population of interest? b. What claim was tested? c. What additional information would you want before deciding if it is reasonable to generalize the conc

> “Want to lose more fat? Skip breakfast before workout” (The Tribune, June 4, 2010) is the headline of a newspaper article describing a study comparing men who did endurance training without eating before training and men who ate before training. Twenty m

> Fans of professional soccer are probably aware that players sometimes fake injuries (called dives or flops). But how common is this practice? The articles “a field guide to fakers and floppers” (The Wall Street Journal, June 28, 2010) and “red card for f

> Consider the population that consists of all employees of a large computer manufacturer. a. Give an example of a question about this population that could be answered by collecting data and using it to estimate a population characteristic. b. Give an e

> For the study described in the previous exercise, answer the following questions. a. The original sample consisted of 52 paintings. These paintings were then divided into two samples consisting of 30 painted before 1500 and 22 painted after 1500. What ar

> The article “the Largest Last Supper: Depictions of food Portions and Plate Size increase over the millennium” (International Journal of Obesity [2010]: 1–2) describes a study in which each painting in a sample of 52 paintings of The Last Supper was anal

> Do people better remember what they learned if they are in the same physical space where they first learned it? The authors of the paper “the Dynamics of memory: contextDependent Updating” (Learning & Memory (2008): 574–579) asked people to learn a set o

> Consider the population that consists of all students enrolled at a college. a. Give an example of a question about this population that could be answered by collecting data and using it to estimate a population characteristic. b. Give an example of a q

> For the study described in the previous exercise, answer the following questions. a. What is the population of interest? b. What claim was tested? c. What additional information would you want before deciding if it is reasonable to generalize the conc

> The article “more communities banning ‘television on a Stick’” (USA TODAY, March 23, 2010) describes an ongoing controversy over the distraction caused by digital billboards along highways. One study mentioned in the newspaper article is described in “ef

> For the study described in the previous exercise, answer the following questions. a. What is the population of interest? b. What population characteristics are being estimated? c. Do you think that the actual percentage of all American teens who own a

> The report “teens and Distracted Driving: texting, talking and other Uses of the cell Phone behind the wheel” (Pew research center, November 16, 2009) summarizes data from a survey of a representative sample of 800 teens between the ages of 12 and 17. Th

> Macular degeneration is the most common cause of blindness in people older than 60 years. One variable thought to be related to a type of inflammation associated with this disease is level of a substance called soluble Fas Ligand (sFasL) in the blood. Th

> The following normal probability plot was constructed using data on the price of seven 2015 Honda Accords with automatic transmissions that were listed for sale within 25 miles of the zip code 19383 (www.autotrader.com, search conducted on September 24,

> Example 6.14 gave the probability distributions shown below for x = number of flaws in a randomly selected glass panel from Supplier 1 y = number of flaws in a randomly selected glass panel from Supplier 2 for two suppliers of glass used in the manufac

> Consider the variable x = time required for a college student to complete a standardized exam. Suppose that for the population of students at a particular university, the distribution of x is well approximated by a normal curve with mean 45 minutes and s

> The paper referenced in the previous exercise also included data on left atrial diameter for children who were considered overweight. For these children, left atrial diameter was approximately normally distributed with a mean of 28 mm and a standard devi

> The size of the left upper chamber of the heart is one measure of cardiovascular health. When the upper left chamber is enlarged, the risk of heart problems is increased. The paper “left Atrial Size increases with body mass index in children” (Internatio

> The probability distribution of x, the number of defective tires on a randomly selected automobile checked at a certain inspection station, is given in the following table: a. Calculate the mean value of x. b. Interpret the mean value of x in the conte

> A company receives light bulbs from two different suppliers. Define the variables x and y as x = lifetime of a bulb from Supplier 1 y = lifetime of a bulb from Supplier 2 Five hundred bulbs from each supplier are tested, and the lifetime of each bulb

> Referring to the previous exercise, let x and y be waiting times on two independently selected days. Define a new random variable w by w = x + y, the sum of the two waiting times. The set of possible values for w is the interval from 0 to 40 (because bot

> Let x be the amount of time (in minutes) that a particular San Francisco commuter will have to wait for a BART train. Suppose that the density curve is as pictured (a uniform distribution): a. What is the probability that x is less than 10 minutes? More

> Suppose that the random variable x = actual weight (in ounces) of a randomly selected package of cereal has the probability distribution described by the density curve pictured here. a. What probability is represented by the shaded area? b. Suppose the

> Airlines sometimes overbook flights. Suppose that for a plane with 100 seats, an airline takes 110 reservations. Define the random variable x as x = the number of people who actually show up for a sold-out flight on this plane From past experience, the