Finance Three Problems Assignment 2015

| June 7, 2016

Question
Question 1:

You borrow $10,000 today with interest rate 7%, and you plan to pay the bank back with 8 equal annual payment. Let us assume the first payment happen at the end of each year.

(a) how much is the annual payment?

(b) How much is the interest payment for year 3?

(c) How much is the balance of principle at the end of year 8?

Year

Principal
beg. year

Payment
end year

Interest

Principal

1

2

3

4

5

6

7

8

Question 2:

(a) What is XIRR of cash flow A and B?

(b) Which cash flow has a higher XIRR? Please answer only A or B.

Date

Cash flow A

Cash Flow B

1-Jan-02

-20,000

-23000

1-Jul-02

13,000

23500

1-Jul-03

3,000

4000

1-Jul-04

3,000

3500

1-Jul-05

3,000

4000

1-Jul-06

3,000

4000

Question 3:

(a) what is the slope of this regress?

(b) what is the intercept of this regress?

(c) What is the R-square of this regress?

Return for the month

Date

S&P 500

IBM

3-Jan-07

1-Feb-07

-2.18%

-6.98%

1-Mar-07

1.00%

2.42%

2-Apr-07

4.33%

8.44%

1-May-07

3.25%

4.70%

1-Jun-07

-1.78%

-1.27%

2-Jul-07

-3.20%

5.14%

1-Aug-07

1.29%

5.83%

4-Sep-07

3.58%

1.95%

1-Oct-07

1.48%

-1.42%

1-Nov-07

-4.40%

-9.10%

3-Dec-07

-0.86%

2.78%

2-Jan-08

-6.12%

-0.92%

1-Feb-08

-3.48%

6.71%

3-Mar-08

-0.60%

1.12%

1-Apr-08

4.75%

4.83%

1-May-08

1.07%

7.66%

2-Jun-08

-8.60%

-8.42%

1-Jul-08

-0.99%

7.97%

1-Aug-08

1.22%

-4.51%

2-Sep-08

-9.21%

-3.92%

1-Oct-08

-16.83%

-20.51%

3-Nov-08

-7.48%

-11.74%

1-Dec-08

0.78%

3.13%

2-Jan-09

-8.57%

8.90%

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