1. You are in a carâ accident, and you receive an insurance settlement of $6500 per year for the next three years. The first payment is to be received today. The second payment is to be received one year fromâ today, and the third payment two years from today. If the interest rate is 3â%, the present value of the insurance settlement is ?

2. If a lender makes a simple loan of $700 for 4 years and charges 3â%, then the amount that the lender receive at maturity is ?

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Trinidad TremblayLv2

24 Jun 2019

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1. Cash Flow Diagrams and Compounded Interest: John decides to take out a loan for $10,000 for school at an annual interest rate of 10%. He agrees to make four equal payments, but will defer these payments for four years while in school. Starting at the end of the 5^th year, he makes four equal annual payments (years 5, 6, 7 and 8). At the end of the 8^th year, the loan is paid off.

(a) Create a table that depicts the cash flow diagram for this problem. It should cover years 0 to 8, and should show the balance, interest charges, each payment, how much of that payment went towards interest and how much towards the principal. The balance should be zero at the end of the 8^th year. Use trial and error to find the required payment.

(b) Compute the annual payment using one of the built-in Excel functions discussed in class. Show that this gives the same answer as (a).

(d) Suppose interest is compounded twice per year instead of annually, but he still makes four annual payments starting at the end of the 5^th year. What is the new annual payment?

2. Kate will purchase a house for $500,000 with a 10% down payment and $10,000 in closing costs. The closing costs are included in the loan. A 10-year loan is arranged at 5% interest compounded monthly.

(a) What is the monthly payment?

(b) By choosing to include the closing costs in the loan, how much money was paid in interest on the closing costs over the life of the loan.

(c) What is the effective interest rate for this loan? (Hint: you must take into account the monthly compounding AND the closing costs.)

(d) Suppose closing costs were paid at closing. How does this change the overall cost of the loan? How does this change the effective interest rate?

(NOTE: EVERYTHING SHOULD BE DONE IN EXCEL. OTHERWISE NO POINTS. INCLUDE THE FUNCTION USED AS WELL)

greensardine434

Healthcare Financial Management and Economics Week 10 Assignment Capital Budgeting -

There are many options to buy capital, including cash purchases, loans, leasing, and other forms of payment. Your goal as a healthcare manager is to determine which method is best for your organization, given its financial and organizational structure (i.e., for-profit or not-for-profit). Time value of money and net present value are two techniques that may help you determine how and when to invest in new capital. For this Assignment, you examine these concepts as they pertain to the healthcare industry. Use the Week 10 Assignment Capital Budget Excel Template to show your work, answer the following questions:

1. If a physician deposits $19,000 today into a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of this investment: a. 3 years from now b. 6 years from now c. 9 years from now d. 12 years from now.

2. The Chief Financial Officer of a hospital needs to determine the present value of $140,000 investment received at the end of year 5. What is the present value if the discount rate is: a. 3% b. 6% c. 9% d. 12% .

rubyelk225

1) A $1,000 par value bond, paying $50 semiannually, with an 8 percent yield to maturity and five years remaining to maturity should sell for ________.

2) Your investment has a 40% chance of earning a 12% rate of return, a 50% chance of earning an 8% rate of return, and a 10% chance of losing 3%. What is the standard deviation of this investment?

3) You purchased a share of stock for $59. One year later you received $5.25 as a dividend and sold the share for $58. Your holding-period return was _________.

4) An insurance company purchases corporate bonds in the secondary market with six years to maturity. The total par value is $55 million. The coupon rate is 11 percent, with annual interest payments. If the expected required rate of return in 4 years is 9 percent, what will the market value of the bonds be then?