Assume that you just borrowed €24207 to finance your studies. You need to make constant monthly payments, starting in one month and ending in 14 years. The bank offers you an effective monthly interest rate of 0,16%. 

You are currently the CEO of NewGears and you need to decide whether or not to give the go ahead regarding the firm’s expansion project. The expansion will generate annual cash-flows, starting at €2000 by the end of year 3 and increasing by 2,2% a year until the end of year 13. 

From the end of year 13 onwards it is expected that the annual cash-flows will start to decrease by 2,8% a year in perpetuity (i.e., the cash-flow that occurs by the end of year (13+1) is 2,8% lower than the one that occurs by the end of year 13).

The required initial investment (t=0) is €17000.

Consider an annual effective discount rate of 11,0%.

Assume that today is your 32^thbirthday and you just deposit your grandmother birthday check in your bank. Consider that your bank offers you a constant annual effective interest rate of 7,34% on its deposits. How old will you be when the initial deposit doubles its value (i.e., if you deposit initially €2 how old will you be when the value in your bank account reaches €4)?

Consider that on 31/12/2019 the company OldSystems also has the following bonds outstanding (5 different types of bonds: A, X, Y, Z and W), all with the same type of risk and there are no accrued interests:

Note: there are only accepted strategies that generate a payoff > 0 at t=0 and a payoff = 0 for t>0.

For question 1 and 2 consider the following data:

Consider that in 30/12/2017 the company OldSystems issued several bonds (denoted Bond A) with 3% annual coupons, a face value of $1000 and a maturity of 6 years. The bond pays coupons to bondholders every year on the same day on which they were issued.

Consider that today is 31/12/2019 and you observe that investors are demanding an YTM of 4,662% to buy this bond.

Compute the price of this bond on 31/12/2019.

Mr. James just purchased his home and took a €283023 mortgage. The mortgage has a 28-year maturity with equal monthly payments. The first payment will occur at the end of the first month. 

Consider a 2,9% APR monthly compounded.

Consider the following financial asset:

Starting at the end of the 1 year (inclusive) it gives you 9 quarterly payments that start at €238 and grow 0,73% every quarter. After the last quarterly payment it will give you 14 annual payments that decrease 1% per year. The first annual payment will be €300 and the annual payments will end by the end of the 20^th year.

Assume a 4% APR quarterly compounded. 

Assume that you just borrowed €22198 to finance your studies. You need to make constant monthly payments, starting in one month and ending in 8 years. The bank offers you an effective monthly interest rate of 0,16%. 

You are currently the CEO of NewGears and you need to decide whether or not to give the go ahead regarding the firm’s expansion project. The expansion will generate annual cash-flows, starting at €2000 by the end of year 3 and increasing by 1,3% a year until the end of year 12. 

From the end of year 12 onwards it is expected that the annual cash-flows will start to decrease by 2,5% a year in perpetuity (i.e., the cash-flow that occurs by the end of year (12+1) is 2,5% lower than the one that occurs by the end of year 12).

The required initial investment (t=0) is €17000.

Consider an annual effective discount rate of 10,7%.

Assume that today is your 31^thbirthday and you just deposit your grandmother birthday check in your bank. Consider that your bank offers you a constant annual effective interest rate of 11,91% on its deposits. How old will you be when the initial deposit doubles its value (i.e., if you deposit initially €2 how old will you be when the value in your bank account reaches €4)?