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Ed Cho Financial Markets Problem Set 1 due 02/02 Friday at end of day (11:59pm) You may type or hand write your answers, as long as they are legible. Psets are required to be in PDF format, and submitted as one file
(instead of multiple files). Each person must hand in a copy of their own problem set. However, you are encouraged to discuss problem sets with other students. 1.
Calculate the present value of $5000 received five years from today if the interest rate is a.
8% compounded annually b.
10% compounded annually c.
APR = 10% compounded semiannually 2.
You are considering buying a new house worth $250,000. You then decide to put 20% down, and consequently you search for a $200,000, 30 year fixed-rate mortgage, with payments that are made monthly. After your search, the best available offer you find is a mortgage with an APR of 6% compounded monthly. a.
What is your monthly mortgage payment? b.
Assume instead that the APR is 5% compounded monthly, and calculate the new monthly mortgage payment. Relative to part (a), the APR decreased by 1%. Calculate the percentage change in your monthly payment as a result of this 1% lower interest rate. c.
You then decide you want to pay off your mortgage in half the time, so you find a 15 year fixed-rate mortgage, with an APR of 6% compounded monthly. Calculate the new monthly mortgage payment. Does your monthly payment exactly double, more than double, or less than double? Explain intuitively.
3.
Your firm’s geologists have discovered a small oil field in New York's Westchester County. The field is forecasted to produce cash flow of C = $2 million/yr, forever. The cost of developing this new oil field is $16.67 million. a.
Determine the internal rate of return on this project. b.
Suppose that instead of developing the new oilfield, you discover a large underground shale rock deposit, that has the same upfront development cost of $16.67 million to extract the shale gas, and has an internal rate of return of 10%. Assuming you only have $16.67 million to invest, which project would you invest in? c.
Redo part (a), except the oilfield is forecasted to produce a cash flow of $2 million for 20 years. Set up the equation that sells for the internal rate of return, but do not solve for it. Is the internal rate of return greater than, less than, or equal to 12%? 4.
A General Motors's bond makes the following cash flow payments in the next 10 years. You receive $80 per year starting in t = 1 until t = 10, and you also receive $1000 in t = 10. a.
If the interest rate is 9%, what is the current market price of these bonds? b.
If the interest rate is 7%, what is the current market price of these bonds? c.
What do your answers to the previous two parts say about the relationship between interest rates and the price of bonds? 5.
You've just graduated college, and you want to save for a dream vacation that takes you around the world, but that means some serious savings. You estimate that once you start work, you could save 5000 a year out of your income at the end of every year and earn an interest rate of 5% on the savings. How much will you be able to spend after 6 years? (Hint: There's more than one way to solve this question. A quick way is to first find the present value, PV, of these payments using the annuity formula, and then find the future value of the PV.) 6.
To buy a house, you borrow a large sum of money from your local savings and loans bank at a nominal interest rate of 15%. Your expectation of inflation is 2%. a.
What do you expect to earn in real terms, i.e., the real interest rate? b.
After you enter the loan agreement, inflation increases to 7%. Who gains and who loses, i.e., is wealth being redistributed from the borrower (you) to the lender (savings and loans bank), or vice versa? Explain intuitively.
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a) Will credit cards help? The average undergraduate student leaves college with a diploma and
around $2750 in credit card debt (graduate students; $4800). Suppose you have a credit card with a
balance of $2750 and an interest rate of 19.8% APR. The minimum payment is $45.00. The amount
of interest due each month is figured as current balance
where r is the rate (decimal form) and n is
12. Fill in the table, making minimum payments.
Current
balance
Month
Interest
Payment
Amount applied to principal
1
$2750.00
$45.38
$45.00
-$0.38
$2750.38
$45.00
$45.00
4
$45.00
$45.00
$45.00
$45.00
8.
$45.00
9.
$45.00
10
$45.00
11
$45.00
12
$45.00
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A newspaper editor starts a retirement savings plan in which $225 per month is deposited at the beginning of each month into an account that earns an annual interest rate of 6.4% compounded monthly.
Find the value of this investment (in dollars) after 20 years. (Round your answer to the nearest cent.)
$
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logo design company purchases four new computers for $12,500. The company finances the cost of the computers for 3 years at an annual interest rate of 5.175% compounded monthly. Find the month
ayment (in dollars) for this loan. (Round your answer to the nearest cent. See Example 8 in this section.)
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Analysis of Receivables Method
At the end of the current year, Accounts Receivable has
balance of $4,375,000; Allowance for Doubtful Accounts has a debit balance of $21,300; and sale
for the year total $102,480,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $205,000.
a. Determine the amount of the adjusting entry for uncollectible acfounts.
b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.
Accounts Receivable
Allowance for Doubtful Accounts
Bad Debt Expense
c. Determine the net realizable value of accounts receivable.
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The analysis of receivables method is based on the assumption that the longer an account receivable is outstanding the less likely that it will be
collected.
The…
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7. 1. Carl Joshua went to Baguio and bought 20 jars of strawberry jam for P5, 000.00 with 10% discount.
When he got back to Peñablanca, he sold 10 of the jars for a total of P3,000.00 and the rest at P320.00
each. How much profit did Carl gain?
8. 2. A watch owner sold a total of 1,000 watches for P1, 000 each for the month of January. He bought
those watches from a supplier at P400 each. The business paid utilities amounting to P40, 000,
miscellaneous P30, 000, internet connection P10, 000 and interest expense of P50, 000 for January.
How much is the profit/ loss for the period?
Exercise #2: PROFITABILITY RATIO
Directions: Compute for the profitability ratios. Show complete solution.
HAKDOG CORPORATION
INCOME STATEMENT
For the period…
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Journalizing Installment Notes
On the first day of the fiscal year, a company issues $52,000, 11%, five-year installment notes that have annual payments of $14,070. The first note
payment consists of $5,720 of interest and $8,350 of principal repayment.
a. Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it blank.
b. Journalize the first annual note payment. If an amount box does not require an entry, leave it blank.
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For you performance task#2 identify what do the underline words refered to Miriam deposite an amount of php89632.37 from abc bank on the 7th birthday of her daughter that pays 1% interest compounded anually she received an amount of php100000 on the 18th birthday of her daughter
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TOPIC: ENGINEERING ECONOMICS
SPECIFIC INSTRUCTION: Solve each problem NEATLY and SYSTEMATICALLY. Show your
COMPLETE solutions and BOX your final answers. Express all your answers in 2 decimal places.
PROBLEM:
Find the exact and ordinary interest on Php 5,000 at 19 % for 30 days.
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all 2021 I Chapter 1 Consumer Finance / Section 1.5 Digital Exercises
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Suppose you are paid $3,000 per month and your employer's 401(k) matches your contributions by 10% up to a
maximum of 15% of your pay. Assuming you max-out your retirement savings and you work for 25 years, how
much will the 401(k) be worth when you retire (if you can get an APR of 8% during your work years)? If you are
taxed at a rate of 27%, then how much will you have when you retire?
Round all answers to 2 decimal places.
Before taxes retirement amount $
Number
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On July 1, 2024, a company loans one of its employees $20,000 and accepts a nine-month, 8% note receivable.
Required:
Calculate the amount of interest revenue the company will recognize in 2024 and 2025. (Do not round intermediate calculations.)
Amount of interest revenue
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Chapter 13 - Homework Problem
During the last week of August, Apache Arts Company's owner approaches the bank for
an $80,000 loan to be made on September 2 and repaid on November 30 with annual
interest of 12%, for an interest cost of $2,400. The owner plans to increase the store's
inventory by $60,000 during September and needs the loan to pay for inventory
acquisitions. The bank's loan officer needs more information about Apache Arts' ability
to repay the loan and asks the owner to forecast the store's November 30 cash position.
On September 1, Apache Arts is expected to have a $3,000 cash balance, $135,000 of
accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise
purchases, and various cash disbursements for the next three months follow:
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The future value of $200 received
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b. $158
C. $253
d. $380
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On October 1, 2024, Ogneva Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable.
Calculate the amount of interest revenue Ogneva will recognize in 2024 and 2025.
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Proceeds from Notes Payable
On January 26, Bella Co. borrowed cash from Conrad Bank by issuing a 30-day note with a face amount of $48,000. Assume a 360-day year.
a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%.
b. Determine the proceeds of the note, assuming the note is discounted at 6%.
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The proceeds equal the cash initially received. Proceeds represents how much in value the borrower is walking away with in cash on
merchandise.
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4 Instruction: Develop and amortization table for the payment of a loan on a house.
Payments are monthly for 10 years.
Loan on the house is $179,000.
5
6.
PMT formula
7
Interest is 5.3% annual.
8
PV formula
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Payment:
10
11
Payment Payment
Number
Month
|Рayment
Amount
Beginning
Ending
Toward
Toward
12
Balance
Balance
Principal
Interest
Apr-02
May-02
13
1
179,000.00
14
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Amount Due at
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$ 6,000.00
Discount Rate Time
3.50%
160
Required:
Using the information above please answer the following:
1. Calculate the bank discount:
2. Calculate the proceeds:
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Assignment - 1. Credit Scores and Loans
Attempt 1 of 1
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QUESTION
1
4
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You get a personal loan of $5,000 with 12% simple interest too be paid over 30 months. What is your monthly payment?
O $150.00
O $166.67
O $216.67
O $175.00
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Fighting Irish Incorporated pays its employees $3,360 every two weeks ($240/day). The current two-week pay period ends on
December 28, 2024, and employees are paid $3,360. The next two-week pay period ends on January 11, 2025, and employees are
paid $3,360.
Required:
1. Record the adjusting entry on December 31, 2024.
2. Calculate the 2024 year-end adjusted balance of Salaries Payable (assuming the balance of Salaries Payable before adjustment in
2024 is $0).
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Calculate the 2024 year-end adjusted balance of Salaries Payable (assuming the balance of Salaries Payable before
adjustment in 2024 is $0).
Ending balance
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a. Determine the employee's gross pay for the week.
1,830 ✔
b. Determine the erpolovee's net pay for the week Round your answer to two decimal places.
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An employee earns $30 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. If the employee worked 54 hours during the week.
Assume that the social security tax rate is 6.0%, the Medicare tax rate is 1.5%, and the employee's federal income tax withheld is $295.
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- Font Paragraph Styles Editing Dictate Editor Paste Undo Clipboard Styles Voice Editor a) Will credit cards help? The average undergraduate student leaves college with a diploma and around $2750 in credit card debt (graduate students; $4800). Suppose you have a credit card with a balance of $2750 and an interest rate of 19.8% APR. The minimum payment is $45.00. The amount of interest due each month is figured as current balance where r is the rate (decimal form) and n is 12. Fill in the table, making minimum payments. Current balance Month Interest Payment Amount applied to principal 1 $2750.00 $45.38 $45.00 -$0.38 $2750.38 $45.00 $45.00 4 $45.00 $45.00 $45.00 $45.00 8. $45.00 9. $45.00 10 $45.00 11 $45.00 12 $45.00 Page 4 of 6 1011 words DFocus 80% P Type here to search 立arrow_forwardNew tab x Content x Quiz 3-MAT-143, section 03F, Fax + https://www.webassign.net/web/Student/Assignment-Responses/last?dep=34832472 a A ✰ DETAILS MY NOTES ASK YOUR TEACHE A newspaper editor starts a retirement savings plan in which $225 per month is deposited at the beginning of each month into an account that earns an annual interest rate of 6.4% compounded monthly. Find the value of this investment (in dollars) after 20 years. (Round your answer to the nearest cent.) $ DETAILS MY NOTES ASK YOUR TEACHI logo design company purchases four new computers for $12,500. The company finances the cost of the computers for 3 years at an annual interest rate of 5.175% compounded monthly. Find the month ayment (in dollars) for this loan. (Round your answer to the nearest cent. See Example 8 in this section.) Submit Assignment Home My Assignments Request Extension Copyright © 1998-2024 Cengage Learning, Inc. All Rights Reserved | TERMS OF USE PRIVACY 12:03 PMarrow_forwardCengage Learning * CengageNOWv2 | Online teachin x * Cengage Learning Assignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress-false eBook Show Me How Analysis of Receivables Method At the end of the current year, Accounts Receivable has balance of $4,375,000; Allowance for Doubtful Accounts has a debit balance of $21,300; and sale for the year total $102,480,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $205,000. a. Determine the amount of the adjusting entry for uncollectible acfounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable. Feedback T Check My Work The analysis of receivables method is based on the assumption that the longer an account receivable is outstanding the less likely that it will be collected. The…arrow_forward
- ENTREPRENEURSHIP_LAS_2nd-C x + O File | C:/Users/user/Downloads/ENTREPRENEURSHIP_LAS_2nd-QUARTER-for-printing.pdf ... (D Page view A Read aloud O Add text | V Draw 9 Highlight O Erase 18 of 29 Directions: Solve the given problem. Show complete solution. 7. 1. Carl Joshua went to Baguio and bought 20 jars of strawberry jam for P5, 000.00 with 10% discount. When he got back to Peñablanca, he sold 10 of the jars for a total of P3,000.00 and the rest at P320.00 each. How much profit did Carl gain? 8. 2. A watch owner sold a total of 1,000 watches for P1, 000 each for the month of January. He bought those watches from a supplier at P400 each. The business paid utilities amounting to P40, 000, miscellaneous P30, 000, internet connection P10, 000 and interest expense of P50, 000 for January. How much is the profit/ loss for the period? Exercise #2: PROFITABILITY RATIO Directions: Compute for the profitability ratios. Show complete solution. HAKDOG CORPORATION INCOME STATEMENT For the period…arrow_forward-et: Mod x * CengageNOWv2 | On x * Cengage Learning B Milestone Two Guidel x G module 5 problem set x om/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=. O eBook Show Me How Journalizing Installment Notes On the first day of the fiscal year, a company issues $52,000, 11%, five-year installment notes that have annual payments of $14,070. The first note payment consists of $5,720 of interest and $8,350 of principal repayment. a. Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it blank. b. Journalize the first annual note payment. If an amount box does not require an entry, leave it blank. Previous Next Check My Work. 3:34 P 56°F Mostly cloudy A O E O 40 11/28/2 (田arrow_forwardFor you performance task#2 identify what do the underline words refered to Miriam deposite an amount of php89632.37 from abc bank on the 7th birthday of her daughter that pays 1% interest compounded anually she received an amount of php100000 on the 18th birthday of her daughterarrow_forward
- TOPIC: ENGINEERING ECONOMICS SPECIFIC INSTRUCTION: Solve each problem NEATLY and SYSTEMATICALLY. Show your COMPLETE solutions and BOX your final answers. Express all your answers in 2 decimal places. PROBLEM: Find the exact and ordinary interest on Php 5,000 at 19 % for 30 days.arrow_forwardCourses Mastering Chernie X 2MateryCheme X loud/modules/unproctoredTest.QuestionSheet McCraith-Sectic x Updte Help Caroline Achienge S01243611acadceduLogout all 2021 I Chapter 1 Consumer Finance / Section 1.5 Digital Exercises Gradebook. Extemat kercises Remaining Time Unimted Suppose you are paid $3,000 per month and your employer's 401(k) matches your contributions by 10% up to a maximum of 15% of your pay. Assuming you max-out your retirement savings and you work for 25 years, how much will the 401(k) be worth when you retire (if you can get an APR of 8% during your work years)? If you are taxed at a rate of 27%, then how much will you have when you retire? Round all answers to 2 decimal places. Before taxes retirement amount $ Number After taxes retirement amount $ Number Submit Assignment Quit & Save Васк Question Menu 4 Next 38°F Partly sunny A 0) 411 PM 11/19/202 end home delete prt sc 144 4+ 4- 40 num lock backspace & 8. 6. 7. home |近arrow_forwardHome Page - JagApp Week 15 - Homework #9 (100 points) i 9 10 points eBook Print References ווח ezto.mheducation.com M Question 9 - Week 15 - Homework #9 (100 points) - Connect Saved On July 1, 2024, a company loans one of its employees $20,000 and accepts a nine-month, 8% note receivable. Required: Calculate the amount of interest revenue the company will recognize in 2024 and 2025. (Do not round intermediate calculations.) Amount of interest revenue Mc Graw Hill 2024 2025 +1 (415) 413-1032 O from your iPhone Check my work ← 8arrow_forward
- V pioblem - Protected View Saveu LOLTIS Searcn References Mailings Review View Help n viiuses. Unless you need to edit, it's safer to stay in Protected View.· Enable Editing Accounting Chapter 13 - Homework Problem During the last week of August, Apache Arts Company's owner approaches the bank for an $80,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $2,400. The owner plans to increase the store's inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Apache Arts' ability to repay the loan and asks the owner to forecast the store's November 30 cash position. On September 1, Apache Arts is expected to have a $3,000 cash balance, $135,000 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow: Budgeted Figures Sales September…arrow_forwardвсе Google Chrome - D... My Learning Progre... N Northwestern Univ... Solution Manual Fo... Business Law Question 28 of 40 View Policies Show Attempt History < Current Attempt in Progress X Your answer is incorrect. 0/0.3 Your grandfather has agreed to deposit a certain amount of money each year into an account paying 7.90 percent annually to help you go to graduate school. Starting next year, and for the following four years, he plans to deposit $2,350, $8,600, $7,200, $6,600, and $12,150 into the account. How much will you have at the end of the five years? (Round answer to 2 decimal places, e.g. 15.25.) Future value at end of five years eTextbook and Media Save for Later Using multiple attempts will impact your score. 20% score reduction after attempt 2 Q Search 41719.11 GUND Attempts: 1 of 3 used Submit Answerarrow_forwardCrop a question SIM ? 11:00 AM A elearning.ju.edu.jo The future value of $200 received today and deposited at 8 percent compounded semi-annually for three years is Select one: a. $352 b. $158 C. $253 d. $380 Previous page Next page Quiz navigation 4. 6. Finish attempt. Go Time left 0:19:14 IIarrow_forward
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