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FIN3013

FIN3013. Lab #4. Group Exercise. Divide into groups of four students Discuss the graphs you created in Assignment #3 What four companies were analyzed? How did each perform relative to the S&P500 What similarities do you notice about the four graphs? What differences do you notice?

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FIN3013

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  1. FIN3013 Lab #4

  2. Group Exercise • Divide into groups of four students • Discuss the graphs you created in Assignment #3 • What four companies were analyzed? • How did each perform relative to the S&P500 • What similarities do you notice about the four graphs? • What differences do you notice? • Do you have any questions about the assignment or results? UTSA College of Business FIN3013Lab

  3. Percentage Returns • In Assignment #3, % return was calculated as (P2-P1)/ P1 • Notice how this relates to the basic time value of money formula: • Future Value = Present Value(1+i) • FV/PV = 1 + i • (FV/PV) – 1 = i • (FV/PV) – (PV/PV) = i • (FV-PV)/PV = i • (P2-P1)/ P1 = return UTSA College of Business FIN3013Lab

  4. Using the HP10B-II Calculator • 5 Basic Keys • PV = present value • FV = future value • N = number of time periods • I/YR = interest rate or growth rate • PMT = payment UTSA College of Business FIN3013Lab

  5. Example Problem #1 • Claudia bought a share of stock for $52 at the beginning of the year. At the end of the year she was able to sell the stock for $61. What was her rate of return? UTSA College of Business FIN3013Lab

  6. Example Problem #2 • Larry places $1,000 in a savings account earning 8% interest. How much will be in the savings account after 3 years? UTSA College of Business FIN3013Lab

  7. Example Problem #3 • What is the present value of $10,000 received 6 years from now if the interest rate is 4.5%? UTSA College of Business FIN3013Lab

  8. Example Problem #4 • You place $1,000 in a savings account that earns 7% interest. How long will it be before there is $2500 in the account? UTSA College of Business FIN3013Lab

  9. Example Problem #5Solving for FV Alan places $100 in an account each month for 25 years. He earns 6% interest, compounded monthly. How much will he have at the end of 25 years? UTSA College of Business FIN3013Lab

  10. Example Problem #6Solving for PMT Iris borrows $18,000 to purchase a car. Glendale Bank makes her a 5-year car loan with a 7% interest rate. What will her monthly car payments be? UTSA College of Business FIN3013Lab

  11. Example Problem #7Solving for PV As part of a legal settlement, Mercury Medical agrees to pay Patricia $10,000 a year for the next 20 years. At a 9% interest rate, what is the present value of this agreement? UTSA College of Business FIN3013Lab

  12. Example Problem #8Solving for I/YR Raymond has placed $20 in his savings account every month for the past 18 years. If he earned 5% interest, compounded monthly on his account, how much does he have in the account? UTSA College of Business FIN3013Lab

  13. Example Problem #9Solving for N Sarah is placing $500 each quarter into a special savings account that earns 6% interest, compounded quarterly. When she has $10,000 in the account, she will use the money for a down payment on a new car. How long will it be before Sarah has accumulated $10,000? UTSA College of Business FIN3013Lab

  14. Example Problem #10Multiple Cash Flows Clarksville just hired a new city manager. The new city manager will receive an immediate signing bonus of $20,000. The one year contract also states that in addition to a month salary of $8,000 the manager will receive $5,000 in three months to cover moving and relocation expenses. Using an 8% discount rate, what is the present value of this one year contract? UTSA College of Business FIN3013Lab

  15. Example Problem #11EAR • Guadalupe State Bank is offering a savings account that pays 6% interest, compounded monthly. What is the EAR on this account? UTSA College of Business FIN3013Lab

  16. For Assignment #4 • Work TVM problems UTSA College of Business FIN3013Lab

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