Can someone please work these problems out using excel spread sheet, so that, I’ll have a better understanding of

what I am doing,”PLEASE!”

Finance 663 Solutions Two

5-1

PV = PMT[(1-(1/(1+I)^N))/I] + 1000/(1+I)^N

Pmt = 80, I = 9%, N = 12, solve for PV= 928.393

5-2

PV = PMT[(1-(1/(1+I)^N))/I] + 1000/(1+I)^N

PV = 850, PMT = 100, N=12, solve for I=12.48%. Remember, on the calculator, make the PV negative. The 1000 is the FV.

7-2

P = D(1)/(r-g), D(1)=1.50, r=.13, g=.06………P=21.429

7-3

P = D(1)/(r-g), D(1)=D(0)*(1+g)=1.2(1+.1)=1.32, g=.10, P=22, solve for r=.16

P(1)=P(0)*(1+g)=22(1.1)=24.2

7-5

D(0)=2, g(1,2)=.20, g(3+)=.07, b=1.2, rf=.075, (rm-rf)=.04

R=rf+b(rm-rf)=.123

D(1)=D(0)(1+g)=2.4

D(2)=D(1)(1+g)=2.88

D(3)=D(2)(1+g)=3.082

P(2)=D(3)/(r-g)=3.082/(.123-.07)=58.143

P=2.4/(1.123) + 2.88/(1.123)^2+58.143/(1.123)^2=2.137+2.284+46.104=50.525 rounding difference from book

7-12

G=.06, D(1)/P=.07, g(1)=.5, g(2)=.25, D(0)=1

R=D(1)/P + g=.13

D(1)=D(0)(1+g)=1.5

D(2)=D(1)(1+g)=1.875

D(3)=D(2)(1+g)=1.988

P(2)=D(3)/(r-g)=1.988/(.13-.06)= 28.393

P=1.5/(1.13) + 1.875/(1.13)^2+28.4/(1.13)^2=1.327+1.468+22.24=25.036 rounding difference from book

7-13

D(1) and D(2)=0, D(3)=.5, g(4)=.8, g(5)=.8, g(6+)=.07, r=.16

D(4)=.5(1.8)=.9

D(5)=.9(1.8)=1.62

D(6)=1.62*(1.07)=1.733

P(5)=1.733/(.16-.07)=19.26

P=..5/(1.16)^3+9/(1.16)^4+1.62(1.16)^5+19.26/(1.16)^5=.32+.497+.771+9.17=10.76

8-3

C=S*N(d1)-Xe^(-rt)*N(d2)

15*.59675 – 15*e^-.03*.5=8.95-15*.97*.5=1.672

8-5

D(1)=[ln(S/X)+(r+(sigma^2)/2)*t]/(sigma*t^.5)=[ln(30/35)+(.05+(.25/2)).333]/.2885= -.3317

D(2)=-.3317-.2885=-.6202

Look these 2 values up with excel. ND(1)=.37, ND(2)=.268

C=S*N(d1)-Xe^(-rt)*N(d2)=30*.37-35*.9835*.268=11.1-9.225=1.875 subject to rounding

8-6

C1=26-21, or 16-21, so the range of c is 5-0=5. The range of S is 10, so h is 10/5=2

Ending position value is 26-2*5=16 or 16-2*0=16

So 20-2c=16/(1.05), c=2.38

9-8

W(d)=.4, w(s)=.6, rd=.09, t=.4, wacc=.0996

W(d)rd(1-t)+w(s)rs=wacc, .4(.09)(.6)+.6(rs)=.0996………….rs=.13

9-15

Wd=.5, ws=.5, rd=.08 because bonds sell at par, P=30, r(s)=.12, D(1)/P=.04, g=.08, t=.4

a.      50%

b.     .5*.08*.6+.5*.12=.084

 

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