PRINCIPLES OF CORPORATE FINANCE
13th Edition
ISBN: 9781264052059
Author: BREALEY
Publisher: MCG
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Question
Chapter 2, Problem 21PS
a.
Summary Introduction
To determine: The one year interest rate.
a.
Expert Solution
Answer to Problem 21PS
The one year interest rate is 10.50%.
Explanation of Solution
Determine the one year interest rate
Therefore the one year interest rate is 10.50%.
b.
Summary Introduction
To determine: The two year discount factor.
b.
Expert Solution
Answer to Problem 21PS
The two year discount factor is 0.8190.
Explanation of Solution
Determine the two year discount factor
Therefore the two year discount factor is 0.8190.
c.
Summary Introduction
To determine: The two year
c.
Expert Solution
Answer to Problem 21PS
The two year
Explanation of Solution
Determine the two year
Therefore the two year annuity factor is 1.7240.
d.
Summary Introduction
To determine: The three year
d.
Expert Solution
Answer to Problem 21PS
The three year
Explanation of Solution
Determine the three year
Therefore the three year annuity factor is 2.4650.
e.
Summary Introduction
To determine: The three year discount factor.
e.
Expert Solution
Answer to Problem 21PS
The three year discount factor is 0.7410.
Explanation of Solution
Determine the three year discount factor
Therefore the three year discount factor is 0.7410.
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a. What is the present value of 15 annual payments of $100, with
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one year from now and increase at 2% per year thereafter, if the
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a. If the one-year discount factor is 0.9217, what is the one-year interest rate? (Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.)
b. If the two-year interest rate is 8.5%, what is the two-year discount factor? (Do not round intermediate calculations. Round your
answer to 4 decimal places.)
c. Given these one- and two-year discount factors, calculate the two-year annuity factor. (Do not round intermediate calculations.
Round your answer to 4 decimal places.)
d. If the PV of $10 a year for three years is $25.54, what is the three-year annuity factor? (Do not round intermediate calculations.
Round your answer to 4 decimal places.)
e. From your answers to (c) and (d), calculate the three-year discount factor. (Do not round intermediate calculations. Round your
answer to 4 decimal places.)
a.
Interest rate
%
b.
Discount factor
c. Annuity factor
d. Annuity factor
e. Discount factor
You are comparing two annuities. Annuity A pays $115 at the end of each year for 5 years. Annuity B pays $105 at the beginning of each year for 5 years. The rate of return on
both annuities is 12 percent. Which one of the following statements is correct given this information?
Annuity B has both a higher present value and a higher future value than Annuity A.
O Annuity A has both a higher present value and a higher future value than Annuity B.
O Annuity A has the same present value and future value as Annuity B.
Chapter 2 Solutions
PRINCIPLES OF CORPORATE FINANCE
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...
Ch. 2 - Prob. 3PSCh. 2 - Compound interest New Savings Bank pays 4%...Ch. 2 - Compound interest In 2017, Leonardo da Vincis...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Prob. 7PSCh. 2 - Future values In the five years preceding the end...Ch. 2 - Discount factors a. If the present value of 139 is...Ch. 2 - Prob. 10PSCh. 2 - Prob. 11PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Prob. 24PSCh. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Annuities due A store offers two payment plans....Ch. 2 - Amortizing loans A bank loan requires you to pay...Ch. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 34PSCh. 2 - Growing annuities You are contemplating membership...Ch. 2 - Prob. 36PSCh. 2 - Growing perpetuities and annuities Your firms...Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Prob. 41PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Prob. 44PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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