SHOW YOUR WORK PLEASE PLEASE PLEASE!!! For time value of money problems, show yo

Question

SHOW YOUR WORK PLEASE PLEASE PLEASE!!! For time value of money problems, show your inputs, and tell me what you use for the calculations! No work and its wrong = 0 points!

A credit card is offered with monthly payments and a 21.99% APR. What is the loan's effective annual rate (EAR)? EAR:

Calculate the price of a $1,000 bond, offering a 10% coupon payment with 20 years left to maturity and a market interest rate of 12%. (Assume interest payments are semiannual.) Is this a discount or premium bond? Price: Type:

On July 25, 2014, the Dow Jones Industrial Average opened $17,083.80 and closed at $16,960.57. What was the effective annual rate return (in percent) of the stock market that day? Daily Return: % EAR: %

Financial analysts forecast GDY Inc.’s growth for the future to be 3%. GDY's recent annual dividend was $4.00. What is the value of GDY stock when the required return is 11%? Stock Value: $

URN Inc. recently paid a $5.00 annual dividend. The dividend is expected to grow at a 4% rate. At a current stock price of $52, what is the return shareholders are expecting? Expected Return %

Explanation / Answer

Part 1)

The formula for calculating EAR is given below:

EAR = (1+APR/12)^12 - 1 [we use 12 since the payment is monthly]

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Using the values provided in the question, we get,

EAR = (1+21.99%/12)^12 - 1 = 24.35% (answer)

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Part 2)

The bond price can be calculated with the use of PV function/formula of EXCEL/Financial Calculator. The function/formula for calculating PV is PV(Rate,Nper,PMT,FV) where Rate = Market Interest Rate, Nper = Period, PMT = Coupon Payment and FV = Face Value

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Here, Rate = 12%/2 = 6%, Nper = 20*2 = 40, PMT = 1,000*10%*1/2 = $50 and FV = $1,000

Using these values in the above function/formula for PV, we get,

Bond Price = PV(6%,40,50,1000) = $849.54 (answer)

Type = Discount Bond [Bond Price is less than Current Price]

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Part 3)

The rate of return can be calculated with the use of following formula:

Return (Percent) = (Closing Price - Opening Price)/Opening Price*100

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Using the values provided in the question, we get,

Return (Percent) = (16,960.57 - 17,083.80)/16,960.57*100 = -.73% (answer)

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Part 4)

The value of the stock can be calculated with the use of following formula:

Stock Value = D1/(Ke - g) where D1 = D0*(1+g), Ke = Required Return and g = growth rate

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Here, D1 = 4*(1+3%), Ke = 11% and g = 3%

Using these values in the above formula, we get,

Stock Value = 4*(1+3%)/(11% - 3%) = $51.50 (answer)

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Part 5)

The expected return can be calculated with the use of following formula:

Expected Return = D1/Current Stock Price + g where D1 = D0*(1+g) and g = growth rate

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Here, D1 = 5*(1+4%) and g = 4%

Using these values in the above formula, we get,

Expected Return = 5*(1+4%)/52 + 4% = 14% (answer)

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