Answer the following questions: Question #1 – Time Value of Money Please give an

Question

Answer the following questions:

Question #1 – Time Value of Money

Please give an example from your own personal or professional experiences (life/career) that involves the Time Value of Money. The Time Value of Money defined as in Chapter 4 as: Present Value, Future Value, Present Value of an Annuity, Future Value of an Annuity, Amortization. It can be one of these above or multiple.

Explain the example and how this/these money valuation tools fit into your example. Please be thorough and specific.

Question #2 – Debt Valuation

Part I – How are corporate bond ratings determined? Why is there so much variation in the coupon rates and prices of various bonds?

Part II - Finally, why do some bonds sell for less that their face value, while others sells at a premium?

Question #3 – Stock Valuation & Risk

DOW DROPOUT - General Electric will drop out of the Dow industrials next week, a milestone in the decline of a company that once ranked among the mightiest of blue chips and was a pillar of the U.S. economy. It will be replaced by drugstore retailer Walgreens Boots Alliance, the latest sign of the rise of the global consumer economy and the post crisis boom in debt issuance that has fueled a global deal-making frenzy. The decision to drop GE, an original member of the Dow that has been a part of the 30-stock index continuously since 1907, marks the latest setback for a conglomerate that once was the most valuable U.S. company, but has been hit hard in recent years by the unraveling of its finance business and competitive problems. GE shares have tumbled 55% over the past 52 weeks, erasing more than $100 billion in wealth.

As an investor in General Electric, please give examples what the above means in relation to an investment? Let’s say you purchased 100 shares of General Electric common stock on January 1, 2002.

Question #4 – Risk Evaluation

Select a company from the Dow Jones Industrials Index and prepare a risk analysis.

You risk analysis should include minimally below:

• Credit rating

• Beta value

• CAPM required return on equity investment

• CAPM rates to use:

Risk Free Interest Rate = 2.85%

Market Risk Return = 8.25%

Explanation / Answer

There are multiple questions posted and i am solvinf first one
1) The example is i want to buy a car want to start saving now for the next 3 years . The expected price of the car is 100000 and the interest rate is 3% . How much we need to have today to be able to buy a car. We use present value formuale
present value=future value/(1+r)^n
=100000/(1+3%)^3
=91514.17

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