Question

Can someone please help me with these homework problems? Please show all work, thumbs up guaranteed for best answer!

I want to have $500,000 when I retire in 15 years. How much money must I deposit today into a savings account which pays an APR of 10% compounded annually? [4 points] If I invest $12,000 in a bank account which pays an APR of 5.2%, compounded weekly what will be the value of my investment after 10 years? [4 points). Suppose the ri = 3% and E[rm] = 7%. What is the expected return on a stock with a beta of 0.6? [4 points] A $1,000 par value bond with a 5% coupon paid semi-annually matures in 10 years' time. a) If its yield to maturity is currently 6%, what is its current market price? [4 points). b) What will be the bond's price immediately before the next coupon payment? [2 points).

Answer 1

1]

future value = present value * (1 + interest rate)number of years

$500,000 = present value * (1 + 10%)15

present value = $500,000 / 1.1015

present value = $119,696.02

Money to deposit today = $119,696.02

2]

Future value = present value * (1 + (APR/n))n*t

where n = number of compounding periods per year. This is 52, as the compounding is weekly.

Future value = present value * (1 + (APR/n))n*t

Future value = $12,000 * (1 + (5.2%/52))52*10

Future value = $20,179.09

Value of investment after 10 years = $20,179.09

3]

expected return = risk free rate + (beta * (expected market return - risk free rate))

expected return = 3% + (0.60 * (7% - 3%))

expected return = 5.40%