ACCT 001A Lecture Notes - Lecture 10: Interest, Capital Market, Investment
19 May 2020
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Don"t need to be able to answer question 9 on review sheet. Problem 2: difference between money market and capital market: money markets are for financial markets that pay you back within one year; capital markets pay you back over a period longer than one year. Problem 3: houses are not very liquid, liquidity is about ease in selling something, stocks, for example, are very liquid. 3, n = 20: hypothetically, when given pv, fv, and n and needing to compute ir, make sure pv and fv don"t have the same signs (negative vs. positive) Problem 5: wrong answer, correct answer: tax (2) / income (2) = ,250 / ,000 = 22. 25% Problem 7: feel free to draw a timeline to help solve. Problem 10: we know the present value but have unknown future payments, calculate stock price, break up into two parts, first use fv of perpetuity formula (get the value in the period before it starts paying)
