 Problem 1.

Calculate the future value of $3,500, compounded annually for each of the

following:

 10 years at 7 percent. $6,885.03

 15 years at 9 percent. $12,748.69

 20 years at 5 percent. $9,286.54

 Problem 2. Calculate the present value for each of the following:

Problem 2. Calculating Present Values
Present Value Years Interest Rate Future Value
12,534.39 5 4% $15,250.
17,780.38 8 7% $30,550.
270,963.65 12 10% $850,400.
32,085.28 20 15% $525,125.

 Problem 3. Calculate the interest rate for each of the following:
Problem 3. Calculating Interest Rates
Present Value Years Interest Rate Future Value
$282. 2 6% $325.
$607. 6 6% $891.
$32,600. 12 12% $142,385.
$57,435. 22 10% $463,200.

 Problem 4. Calculate the number of years in each of the following:
Problem 4. Calculating the Number of Periods
Present Value Years Interest Rate Future Value
$765. 10 6% $1,385.
$845. 18 9% $4,752.
$17,200. 30 11% $432,664.
$23,700. 18 14% $182,529.

 Problem 5. Refer to the cash flows listed for the Kelly Company investment projects in the table
below. The discount rate is 6 percent. Calculate the present value of these cash flows. What is the
present value at:
 12 percent?
 17 percent?
Problem 5. Present Value and Multiple Cash Flows
Year Cash Flow
1 699.64 and 641.03 $750.
2 669.64 and 613.63 $840.
3 875.49 and 767.98 $1,230.
4 934.21 and 784.47 $1,470.

 Problem 6.Value the bond Midcorp has issued, with the following characteristics:
 Par: $1,000.
 Time to maturity: 28 years.
 Coupon rate: 7.50 percent.
 Semiannual payments.
Calculate the price of this bond if the YTM is each of the following:
 7.50 percent. 5.11% $5,110.00
 9 percent. 5.04% $5040.00
 4 percent. 5.44% $5440.00

Problem 7. Calculate the bond yield in the following scenario: Two years ago, Walters
Electronics Corporation issued 20-year bonds at a coupon rate of 6.75 percent. The bonds make
semiannual payments, and currently sell for 106 percent of par value. Calculate the YTM.

5.36% $5360

Problem 8. Calculate the stock value in the following scenario: The next dividend payment by
RST, Incorporated will be $3.45 per share. The dividends are projected to sustain a 6.50 percent
growth rate into the future. If RST stock currently sells for $67 per share, what is the required
return?

Based on a current dividend price of $3.45 and a growth rate of 67.000%, in order to earn your
6.500% required rate of return the most you could pay for this stock would be -$9.52 per share.

Problem 9. Calculate the stock value in the following scenario: Nickels Corporation will pay a
$3.10 per share dividend next year. The company plans to increase its dividend by 4.25 percent
per year, indefinitely. How much will you pay for the company's stock today if you require a 12
percent return on your investment?

Based on a current dividend price of $3.10 and a growth rate of 4.250%, in order to earn your
12.000% required rate of return the most you could pay for this stock would be $41.70 per share.