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# A bank account pays 10% interest with semi-annual compounding.

A series
of deposits started with a deposit of \$5,000 on July 1, 2006. Deposits in the
series will occur each six months. Each deposit in the series will be for
\$200 less than the one before it. The last deposit in the series will occur on
July 1, 2012. What balance will the account have on July 1, 2023 if the
balance was zero prior to the first deposit and no withdrawals are made?

You purchased a zero-coupon bond one year ago for \$282.33. The market interest
rate is now 7 percent. If the bond had 19 years to maturity when you originally
purchased it, what was your total return for the past year? This number should be
expressed as a percentage.
I already tried this one way and got 4.79% and that is incorrect.

A corporate bond with a 7.700 percent coupon has eleven years left to
maturity. It has had a credit rating of BB and a yield to maturity of 10.1
percent. The firm has recently become more financially stable and the
rating agency is upgrading the bonds to BBB. The new appropriate
discount rate will be 9.0 percent.
What would be the total return of the bond in dollars?
What would be the total return of the bond in percentage?
Suppose you currently own 5,000 shares of AZZ Incorporated stock that is
currently selling at \$40 per
share. You are planning to hold on to the shares until May of next year due to tax
considerations and
would like to protect yourself from possible fluctuations in the stock price. You
decide to limit the risk
by selling (writing) fifty May call options with a strike price of \$45 that is selling
at \$2. At the same time
you purchase fifty May put options with a strike price of \$35 and is selling at \$3.
(a) What is the option strategy that you have decided to employ?
(b) What will be the total value (Hint: Take into account the premiums paid and
your strategy) of your portfolio in May of next year if the stock price ends up at (a)
\$30? (b) \$40? and (c)
\$50.

(c) Compare these proceeds to what you would have realized if you simply had
continued to hold the
shares without employing the option strategy above. What is the advantage and
collar strategy?
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## A /New York daily newspaper called "Manhattan Today" charges an annual

subscription fee of \$108. Customers prepay thier subscriptions and receive
260 issues over the year.To attract more subscribers, the company offered
new subscribers the ability to pay \$110 for an annual subscription that also
would include a coupon to receive a 40% discount on a one-hour ride
through Central Park in a horse-drawn carriage. The list price of a carriage
ride is \$100 per hour. The company estimates that approximately 30% of
the coupons will redeemed.
a. how much revenue should Manhattan Today recognize upon receipt of
the \$110 subscriptions price?
b. how many performance oligation exist in this contract?
c. Prepare the jornal entry to recognize sale of 14 new subscriptions,
clearly idenitfying the revenue or unearned revenue associated with each
performance obligation.

The preferred stock of the Clarence Radiology Company has a par value of
\$ 100 and a \$9 dividend rate. You require an 11 percent rate of return on
this stock. What is the maxi-mum price you would pay for it? Would you
buy it at a market price of \$ 96?
Maximum Price = 100*9%/.11 = 81.82
No, I will not buy it at a price of 96, since its maxium price should be 81.82.