TIME
VALUE OF MONEY 3-45
PROGRESS CHECK
(Continued)
4.
If you borrow $150,000 for five years at an 11.5% annual rate, compounded
monthly, payable at the end of the loan, how much will you have to pay at the end of
five years?
$_____________________
5.
To calculate the present value of a bond portfolio, we apply a discount rate that
represents the (select two):
_____ a) rate of return on the next best alternative investment.
_____ b) reciprocal value of an interest rate on a comparable investment.
_____ c) investor's required rate of return.
_____ d) investor's return on the bond portfolio.
_____ e) risk factor associated with the bond portfolio.
6.
XYZ Company is issuing zero-coupon bonds to fund its expansion plans. The bonds
have a face value of $100,000 and a maturity of five years. How much would an
investor requiring a 10% return be willing to pay today for one of
these bonds?
$_____________________