Exercise 3.4 A company will face the following cash requirements in the next eight quarters (positive entries represent cash needs while negative entries represent cash surpluses): Q1 Q2 Q3 Q4 Q5 Q6 Q7 100 500 100 -600-500 200 600 The company has three borrowing possibilities. Q8 -900 A 2-year loan available at the beginning of Q1, with a 1% interest per quarter. • The other two borrowing opportunities are available at the beginning of every quarter: a 6-month loan with a 1.8% interest per quarter, and a quarterly loan with a 2.5% interest for the quarter. • Any surplus can be invested at a 0.5% interest per quarter. Formulate a linear program that maximizes the wealth of the company at the beginning of Q9.

Exercise 3.4 A company will face the following cash requirements in the next eight quarters (positive entries represent cash needs while negative entries represent cash surpluses): Q1 Q2 Q3 Q4 Q5 Q6 Q7 100 500 100 -600-500 200 600 The company has three borrowing possibilities. Q8 -900 A 2-year loan available at the beginning of Q1, with a 1% interest per quarter. • The other two borrowing opportunities are available at the beginning of every quarter: a 6-month loan with a 1.8% interest per quarter, and a quarterly loan with a 2.5% interest for the quarter. • Any surplus can be invested at a 0.5% interest per quarter. Formulate a linear program that maximizes the wealth of the company at the beginning of Q9.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

27
A 30 year, monthly payment ARM has the following characteristics: loan amount = $135,000, index value = 5.00%, margin = 2.50, discount points = 2, teaser rate = 6%. The payment for year one is: d $925.06 A. $943.94 B. $724.71 C. $809.39 D. $793.21
solve without chat gpt A bank is offering aloan of $25,000 with a nominal interest rate of 18% compoundedmonthly, payable in 60 months. (Hint: The loan origination fee of2% will be taken out from the loan amount.)a) What is the monthly payment?b) If a loan origination fee of 2% is charged at the time of theloan, what is the What is the monthly payment?
Question 2 Which one of the following banks has the highest and which one has the lowest EAR for your investment? And WHY? Bank 1: Pays 8.5% APR with monthly compounding. Bank 2: Pays 9% APR with daily compounding.Bank 3: Pays 9% APR with annual compounding. Bank 4: Pays 8.5% APR with daily compounding.
Problem 5 A person plans to make a series of equal quarterly deposits of $1,500 each into a savings account, which pays 6.5%, compounded daily. The first deposit is made at the start of the first quarter and the last payment is paid at the end of the last quarter. Show work to determine how much will be accumulated in the savings account after ten years, right after the last deposit is made? Assume 91 days per quarter and 365 days per year.
2. A loan earns an interest of 12% compounded- quarterly and should be paid within 6 yrs. How much is the loan if the mode of payment is made this way: CFD *focal point at 4, and draw a cash flow diagram LIFT 2 3 4 $ 15,000 $ 30,000 P 0 1 $ 20,000 5 i=12% compounded quarterly F = P(1 + i)n P=F(1+i)" 6 $40,000 REMEMBER THIS!
Question 2 The following interest rate structures are on offer by three independent banks: Tree Bank: 16% compounded annually; Branch Bank: 15% compounded monthly; Leaf Bank: 15% compounded quarterly. Note: Assume 365 days in a year. Q.2.2 Rank the three options from most preferable to least preferable to a borrower, with a reason why.
j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 10%. Payment $100 $300 $500 Round your answers to the nearest cent. Year 1 2 3 PV of investment: $ FV of investment: $ k. Five banks offer nominal rates of 9% on deposits, but A pays interest annually, B pays semiannually, C pays quarterly, D pays monthly, and E pays daily. Assume 365 days in a year. 1. What effective annual rate does each bank pay? If you deposit $3,000 in each bank today, how much will you have in each bank at the end of 1 year? 2 years? Round your answers to two decimal places. EAR FV after 1 year FV after 2 years Nominal rate $ $ Payment $ A A B % $ $ $ % B B с % 2. If the TVM is the only consideration, what nominal rate will cause all of the banks to provide the same effective annual rate as Bank A? Round your answers to two decimal places. $ % $ $ с C 3. Suppose you don't have the $3,000 but need it at the end of 1 year. You plan to make a series of…
Question 2 A company is considering an issue of Commercial Paper (CP) to raise $15 million. The issue will mature in 30 days. It will be issued at a discount of 40 basis points. The dealer will charge an annualized fee of 10 pasis points and will require a backup letter 0.1% 0,4% of credit (L/C) to be issued in its favour at a cost of 25 basis points. 0.25% Required: Assuming a 360-day year, calculate: Par value Dollar discount a) the usable funds that the company will raise upon issue of the CP b) the pro-rated dealer fee c) the pro-rated L/C fee d) the effective annual interest that the company is paying for the credit it raises through the issue of CP
None
Problem 1 The management of Campaign for Peace in Nepal Limited decided to buy a printing press by taking a loan of Rs 1,500,000 for 4 years from Peace Cooperative Limited. The loan bears a compound annual interest rate of 12 percent and calls for equal annual installment payments at the end of each year for 4 years. a. What is the amount of annual payments? b. Prepare a schedule showing the fraction of interest and principal payment for each year. c. What fraction of payment made in year 2 represents the principal? d. What fraction of payment made in year 4 represents the interest?
Problem 1 The management of Campaign for Peace in Nepal Limited decided to buy a printing press by taking a loan of Rs 1,500,000 for 4 years from Peace Cooperative Limited. The loan bears a compound annual interest rate of 12 percent and calls for equal annual installment payments at the end of each year for 4 years. a.What is the amount of annual payments? b.Prepare a schedule showing the fraction of interest and principal payment for each year. c.What fraction of payment made in year 2 represents the principal? d.What fraction of payment made in year 4 represents the interest?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS