Question

1.An investor bought Stock A and Bond B at the beginning of 2018, and sold them at the end of 2018, given the following information: (10 points) Stock Price at the beginning of Price at the end of Cash dividend during 2018 2018 the year A $10 $10 $2 Bond Price at the beginning of Price at the end of Coupon payment during 2018 2018 the year B $18 $2 (1) For the l-year holding period, compute the return of Stock A. (2) For the l-year holding period, compute the return of Bond B. $19 2. An investor is interested in the following piece of property: The property will cost $60,000 at time zero. It will provide cash flows of $44,000 in year 1, $36,300 in year 2. The residual value of the property is 0. What is the NPV of the project if the investor's required rate of return is 10%? Should we accept or reject the project? (10 points)

Answer 1

Answar yeor talding period Ratn for Stock A P,-Po) Dividend Po 0-10)+2 X-L00 /0 Q07 ,Priceasck at ta Begiuning tperiod P, Price StoalR at the Endl 6 paiod (2) yor alding peiad ot Boud B Bi-Bot hnterest 100 Bo Bo Price Bi Roud ot tus Beginning feriod Poe Roud at ta VN3 feaiad -18) + 2 xloo 18 16.% Anolysis ot Cpitel Budgehng Deanon ihal outlay tdoy Cot t-o) Pesent Value aa atlo cect) Cala Flows $60,000 17 Present Valua Foctor @10% Yoox Pre sent Value 1 444000 0.9091 40000.4 39.938.32 Total 69.998.73 36,3০১ 0.8264 N PV PVCTI- Inital out 69,39272-60,0z0 shoulol be + 9,998.72 acepeol Since NP is pasitive preject The