If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money?

If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money?

4-5:

You have $42,180.53 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $250,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal?

4-20:

a. Set up an amortization schedule for a $25,000 loan to be repaid in equal instalments at the end of each of the next 5 years. The interest rate is 10%.
b. How large must each annual payment be if the loan is for $50,000? Assume that the interest rate remains at 10% and that the loan is still paid off over 5 years.
c. How large must each payment be if the loan is for $50,000, the interest rate is 10%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Why are these payments not half as large as the payments on the loan in part b?

4-22:

Washington-Pacific invested $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-P’s expected rate of return?

Chapter 5 Problem 5-15, 5-21
5-15;

Absalom Motors’s 14% coupon rate, semiannual payment, $1,000 par value bonds that mature in 30 years are callable 5 years from now at a price of $1,050. The bonds sell at a price of $1,353.54, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds?

5-21:

Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments.
a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell?
b. Suppose that, 2 years after the initial offering, the going interest rate had risen to 12%. At what price would the bonds sell?
c. Suppose, as in part a, that interest rates fell to 6%, 2 years after the issue date. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time?

Chapter 6 Problem 6-4, 6-10

6-4:

A stock’s returns have the following distribution:
Demand for Probability of Rate of return

Company’s this Demand if this demand

Products Occuring Occurs

Weak 0.1 (50%)

Below Average 0.2 (5)

Average 0.4 16

Above average 0.2 25

Strong 0.1 60

1.0

Calculate the stock’s expected return, standard deviation, and coefficient of variation.

6-10:

You have a $2 million portfolio consisting of a $100,000 investment in each of 20different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio’s new beta be after these transactions?