FOUNDATIONS OF FINANCE-MYFINANCELAB
10th Edition
ISBN: 9780135160619
Author: KEOWN
Publisher: PEARSON
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Chapter 6, Problem 7MC
Summary Introduction
To determine: The monthly holding period return and standard deviation.
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Using the Treasury yield information in part c, calculate the following rates using geometric averages (round your answers to three decimal places):
The 1-year rate, 1 year from now
The 5-year rate, 5 years from now
The 10-year rate, 10 years from now
The 10-year rate, 20 years from now
Assume the interest is 8% compounded quarterly.
a)Find the quarterly effective interest rate for 8% compounded quarterly.
(b) Find the future value at the end of the 8th quarter of the cash flows identified at the end of quarter 4 and quarter 8.
(c) Find the end of quarter deposits, A, that are equivalent to the future value you calculated in part b.
For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table:
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
a.
11%
10
Annually
enter percentages
%
enter the number of periods
b.
8%
8
Quarterly
enter percentages
%
enter the number of periods
c.
10%
19
Semiannually
enter percentages
%
enter the number of periods
2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, e.g. 458,58.1.)
Annual Rate
Number of Years Invested
Number of Rents Involved
Frequency of Rents
(a) Rate of Interest
(b) Number of Periods
a.
12%
30
30
Annually
enter percentages
%
enter the number of periods
b.
11%
16
32
Semiannually
enter percentages
%
enter the number…
Chapter 6 Solutions
FOUNDATIONS OF FINANCE-MYFINANCELAB
Ch. 6 - a. What is meant by the investors required rate of...Ch. 6 - Prob. 2RQCh. 6 - What is a beta? How is it used to calculate r, the...Ch. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - What effect will diversifying your portfolio have...Ch. 6 - (Expected return and risk) Universal Corporation...Ch. 6 - (Average expected return and risk) Given the...
Ch. 6 - (Expected rate of return and risk) Carter, Inc. is...Ch. 6 - (Expected rate of return and risk) Summerville,...Ch. 6 - Prob. 5SPCh. 6 - Prob. 9SPCh. 6 - Prob. 10SPCh. 6 - Prob. 11SPCh. 6 - Prob. 12SPCh. 6 - Prob. 14SPCh. 6 - (Capital asset pricing model) Using the CAPM,...Ch. 6 - Prob. 16SPCh. 6 - Prob. 17SPCh. 6 - a. Compute an appropriate rate of return for Intel...Ch. 6 - (Estimating beta) From the graph in the right...Ch. 6 - Prob. 20SPCh. 6 - Prob. 21SPCh. 6 - (Capital asset pricing model) The expected return...Ch. 6 - (Portfolio beta and security market line) You own...Ch. 6 - (Portfolio beta) Assume you have the following...Ch. 6 - Prob. 1MCCh. 6 - Prob. 2MCCh. 6 - Prob. 3MCCh. 6 - Prob. 4MCCh. 6 - Prob. 5MCCh. 6 - Prob. 6MCCh. 6 - Prob. 7MCCh. 6 - Prob. 8MCCh. 6 - Prob. 9MCCh. 6 - Prob. 10MCCh. 6 - Prob. 11MC
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- Assume you deposit $1,000 in your savings account. Performance a sensitivity analysison the relationship between future value at the end of year 10 and interest rate. Plot therelationship on a chart and label the graph clearlyarrow_forwardFor the following investment, find the total number of compounding periods and the interest rate per period. Do not enter the percent symbol in your answer. Round percentage answer to two decimal places. Term of Nominal Interest Compounding Rate per Investment (Annual) Rate (%) Compounded Periods Period (%) 8 years quarterly %arrow_forwardFind the total number of compounding periods and the interest rate per period for the investment. Term of Nominal Interest Compounding Rate per Investment (Annual) Rate (%) Compounded Periods Period (%) 7 years 9 monthlyarrow_forward
- For each of the following situations involving annulties, solve for the unknown. Assume that interest is compounded annually and that all annulty amounts are received at the end of each period. (/= Interest rate, and n = number of years) Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. 2. 3. 4. 5. Present Value 248, 196 442,750 650,000 175,000 Annuity Amount $ 5,000 80,000 60,000 155,040 8% 11% 10% n = 5 4 10 4arrow_forwardYou invest $94.1, and your investment account shows $107.9 at the end of year one, $97.9 at the end of year two, and $107.1 at the end of year three. Calculate the Annual Holding Period Return (HPR) over the full period.arrow_forwardFind the interest rates in the situation as: The effective annual interest rate is 11.02% and compounding is monthly. Find the nominal interest rate.arrow_forward
- Find the total number of compounding periods and the interest rate per period for the investment. Term of Nominal Compounding Periods Rate per Period (%) Interest Investment (Annual) Rate (%) Compounded 7 years monthlyarrow_forwardYou are comparing two investments. The first pays 3 percent interest per month, compounded monthly, and the second pays 6 percent interest per six months, compounded every six months. a. What is the effective semiannual interest rate for each investment? b. What is the effective annual interest rate for each investment? c. Based on the interest rates, which investment is preferred? Does the decision depend on whether the comparison is based on an effective six-month rate or an effective one-year rate? a. The effective semiannual interest rate for the first investment is percent. (Type an integer or decimal rounded to two decimal places as needed.)arrow_forwardAssume you deposit $1,000 in your savings account. Performance a sensitivity analysis on the relationship between future value at the end of year 10 and interest rate. Plot the relationship on a chart and label the graph clearlyarrow_forward
- Find the total number of compounding periods and the interest rate per period for the investment. Term of Compounding Periods Rate per Period (%) Nominal Interest Investment (Annual) Rate (%) Compounded 7 years monthly X %arrow_forwardFor each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table: Annual Rate Number of Years Invested Compounded (a) Rate of Interest (b) Number of Periods a. 11% 10 Annually % b. 8% 8 Quarterly % c. 10% 19 Semiannually % 2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, e.g. 458,58.1.) Annual Rate Number of Years Invested Number of Rents Involved Frequency of Rents (a) Rate of Interest (b) Number of Periods a. 12% 30 30 Annually % b. 11% 16 32 Semiannually % c. 12% 8 32 Quarterly %arrow_forwardFind the total number of compounding periods and the interest rate per period for the investment. Term ofInvestment Nominal(Annual) Rate (%) InterestCompounded CompoundingPeriods Rate perPeriod (%) 7 years 4 quarterly %arrow_forward
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