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Finance (1)
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Department
Finance
Course
FINANCE 251
Professor
Nick
Semester
Spring

Description
Question 1 (a) C = 150,000 n = 40 r = 4% Total sum @ t=15 is $2,968,916.08 FV = (b) n = 15 r = 3% $2,968,916.08 Yearly deposit in the next 15 years is $159,628.47 (c) C = 200,000 n = 15 r = 3% Total sum @ t=15 is $3,719,782.78 Yearly withdrawal after $187,936.41 retirement is Question 2 (a) C = 60 FV = 1000 n = 2 r = 5% Bond price @ t=0 is $1,018.59 (b) C = 60 FV = 1000 n = 2 r = 7% Bond price @ t=1 is $990.65 Annual rate of return is 3.15% The actual return is lower than the promised YTM of 5% because the increase in interest rate negatively affects the bond price at the end of year 1. This is the pri
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