UB MGF 401 - MGF301_Assignment_1_-_Fall_2012 (2 pages)

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MGF301_Assignment_1_-_Fall_2012



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MGF301_Assignment_1_-_Fall_2012

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Pages:
2
School:
University at Buffalo, The State University of New York
Course:
Mgf 401 - Financial Institutions
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ASSIGNMENT 1 MGF 301 Corporation Finance Fall 2012 DUE Wednesday September 19th at 3 00pm in Jacobs 365 EST Singapore due date is Thurs September 19th at 3 00am Singapore Time You may in a group of up to 4 on this Assignment Please indicate clearly on all submitted Assignments who the members of the group are Please note all assignments submitted with more than 4 group members will automatically receive a 0 grade No late assignments will be accepted You may hand in the assignment in person in Jacobs 365 put it under the door if no one is there or submit it by email to the link in UBLearns before the time it is due All electronic submissions must be to the link in UBLearns Note please follow all the Digital Submission rules see Syllabus Answer all of the following questions For each answer show your work to get full points stating the answer alone is not sufficient 1 If your last name start with A K you should select one stock that you believe will go up in value the most over the semester If your last name starts with L Z you should select three stocks that you believe will go up the most over the semester Once you have selected your stocks join the class group MGF301 Assign1 at Smartstocks com using the password mgf301 and buy the stock s you have selected To buy stocks at Smartstocks com you need to first create an account Use whatever name and password you want to create this account note you do not have to use your name or any real information about yourself This account is free to create and you do not need to sign up for any of the services offered Once you have created an account click on Group Features on the left side of the screen to enter the group section Then click on Join a Group Scroll through the list to find MGF301 Assign 1 and enter the password mgf301 If you then go to Portfolio you should then see that you are a member of the group To buy stock find the ticker symbol from an online source such as Yahoo Finance and enter the ticker symbol with the number of shares you wish to purchase If you are buying one stock put at least 950 000 into the one stock If you are buying three stocks put at least 300 000 into each of the three stocks Please include your userid and the stock you bought as your answer to question 1 on this assignment Note please do not do any further trading in this account for the remainder of the semester we are running an experiment that we will evaluate throughout the semester 2 Your uncle died last year and left you money in his will You are to receive 30 000 next year in time 1 and 70 000 three years from today i e in time 3 a What is the value of the inheritance today in time 0 if the appropriate discount rate is 3 5 and you compound annually 3 5 each b If you invest the money when you receive it how much will it grow to 30 years from today i e in time 30 if you earn year 3 Your neighbor is buying a new recreational vehicle RV He has the following options to finance the RV I Pays 47 000 today in time 0 II Buy under a no payments for two years program by agreeing to pay 50 000 two years from today in time 2 III Make 84 monthly payments over 7 years of 600 payable at the end of each month a If the interest rate is 5 5 annually calculate the present value of each option b How low does the interest rate have to fall before Option I is a better deal than Option II 4 a If you will be making equal deposits into a retirement account for 20 years with each payment at the end of the year how much must you deposit each year if the account earns 4 compounded annually and you wish the account to grow to 500 000 after 40 years in time 40 b How does your answer change if the account pays interest compounded monthly at an annual rate of 4 Note use monthly compounding for all calculations 5 a You belong to an unusual pension plan because your retirement payments will continue forever and will go to your descendants after you die If you will receive 20 000 per year at the end of each year starting 25 years from now i e the first payment is in time 25 what is the present value of your retirement plan if the discount rate is 4 5 b How does your answer change if you receive 1 750 per month every month starting 25 years from today in monthly time period 300 and the annual discount rate is 4 5


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