Download Quiz 4 Problems - Corporate Financial Management | FIN 4360 and more Quizzes Finance in PDF only on Docsity! Finance 4360; Quiz 4; Spring 2008; 2:00 Class Name _________________________________ Note: For any question with numbers, all of the points are earned by setting up solutions. There are no points for any calculations. As a result, you will likely earn a higher grade on this quiz if you simply set up problems but never touch your calculator. “Setting up solutions” may involve writing a single number. Use following information to answer questions 1-3 You are considering investing with a friend who is starting a small business. He has promised to make quarterly payments that increase by 1% each. Your first payment would be $100 and would occur seven months from today and your final payment would occur two years and ten months from today. You plan to determine the most you would invest in the business in two steps: 1) present value of a growing annuity, and 2) present value of a lump sum. 1. What would you use for “C” in your first step? 2. What would you use for “N” in your first step? 3. If you use the same interest rate in step 2) that you did in step 1, what would you use for “n” in your second step? 4. Assume an APR of 9% with semiannual compounding. Set up to calculate the equivalent interest rate you would need to use to determine the present value of a series of monthly deposits. 5. Your goal is to have $100,000 saved by three years from today. As a result, you have just made the first of a series of monthly deposits into a savings account. You plan for each deposit to grow by 1% each but will make your final deposit two years from today (you will continue to earn interest on the account until you withdraw the money three years from today). List the sequence of steps you that would allow you to determine how large your first and third deposits will need to be. If you are not solving for the “name” of the step (such as the present value of a single sum), state what you are solving for (such as payment or interest rate or number of payments). Assume you have an interest rate that you can use to calculate present or future values. Note: you do not need to use any equations or numbers to answer this question!
