Übung 2 (22 - nr.2 PDF

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Investment and Finance – Exercises 2. Exercises (22/12/2016) Chapter 2 2.1 At an interest rate of 12% the six-year discount factor is .507. How many dollars is $.507 worth in six years if invested at 12%? rm = 12% =0,12 t=6   1 FV = C ∗ + r = .507 ∗ 1.12  = $

DF = 0,507

2.2 If the PV of $139 is $125, what is the discount factor (DF)? PV = 125 FV = 139 PV = Discount factor ∗ FV 125 = DF ∗ 139 125 = &. '(( DF = 139 1 )DF = δ = + 1 + r

2.3 If the coast of capital is 9%, what is the PV of $374 paid in 9 years? r = 9% FV = $374 PV = δ, ∗ C, 1 PV = ∗ 374 1 + 0.09/ = $01. (

t=9

2.4 A project produces a cash flow of $432 in year 1, $137 in year 2 and $797 in year 3. If the cost of capital is 15%, what is the project´s PV? Cash flows: t=1: $432 t=2: $137 r = 15% PV = δ2 ∗ C2 + δ3 ∗ C3 + δ4 ∗ C4 797 432 137 + PV = + 3 1.15 1.15 1.15 4 / = $, &&6. 1'

t=3: $797

2.5 If you invest in $100 at an interest rate of 15% how much will you have at the end of eight years? PV = C0 = $100 r = 15% FV = C ∗ 1 + r  = formula of the FV FV = 100 ∗ 1.15;  = $6&...