29 Jul WHAT IS THE PRESENT VALUE OF THE FOLLOWING UNEVEN CASH FLOW STREAM −$50, $100, $75, AND $50 AT THE END OF YEARS 0 THROUGH 3?
FIN 534 – Homework Set #2
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information
and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of
Strayer University.
FIN 534 Homework Set #2 1156 (7-21-15) Page 1 of 1
Directions: Answer the following questions on a separate document. Explain how you reached the answer
or show your work if a mathematical calculation is needed, or both. Submit your assignment using the
assignment link in the course shell. This homework assignment is worth 100 points.
Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s
evaluation process requires you to take an examination that covers several financial analysis techniques.
Use the following information for Questions 1 through 2:
1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the
end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.
2. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest
rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account
on October 1, or 9 months later?
Use the following information for Questions 3 and 4:
A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is
10%.
3. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for
$887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you
about the relationship between rd and the bond’s coupon rate?
4. What are the total return, the current yield, and the capital gains yield for the discount bond in
Question #3 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does
not default on the bond.)
FIN 534 – Homework Set #3
© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information
and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of
Strayer University.
FIN 534 Homework Set #3 1158 (8-14-2015) Page 1 of 1
Directions: Answer the following questions on a separate document. Explain how you reached the answer
or show your work if a mathematical calculation is needed, or both. Submit your assignment using the
assignment link in the course shell. This homework assignment is worth 100 points.
Use the following information for questions 1 through 4:
The Goodman Industries’ and Landry Incorporated’s stock prices and dividends, along with the Market
Index, are shown below. Stock prices are reported for December 31 of each year, and dividends reflect
those paid during the year. The market data are adjusted to include dividends.
Goodman Industries Landry Incorporated Market Index
Year Stock Price Dividend Stock Price Dividend Includes Dividends
2013 $25.88 $1.73 $73.13 $4.50 17495.97
2012 22.13 1.59 78.45 4.35 13178.55
2011 24.75 1.50 73.13 4.13 13019.97
2010 16.13 1.43 85.88 3.75 9651.05
2009 17.06 1.35 90.00 3.38 8403.42
2008 11.44 1.28 83.63 3.00 7058.96
1. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and
then calculate average annual returns for the two stocks and the index. (Hint: Remember, returns
are calculated by subtracting the beginning price from the ending price to get the capital gain or
loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning
price. Assume that dividends are already included in the index. Also, you cannot calculate the
rate of return for 2008 because you do not have 2007 data.)
2. Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index.
(Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the
STDEV function in Excel.)
3. What dividends do you expect for Goodman Industries stock over the next 3 years if you expect
the dividend to grow at the rate of 5% per year for the next 3 years? In other words, calculate D1,
D2, and D3. Note that D0 = $1.50.
4. Assume that Goodman Industries’ stock has a required return of 13%. You will use this required
return rate to discount the dividends calculated earlier. If you plan to buy the stock, hol
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