# Financial Statement Analysis

October 31, 2020
###### Calculate the cost of the insurance as a share of total income.
October 31, 2020

The current Dollar-Pound exchange rate is 1.60 dollars perBritish Pound. The U.S. and British risk-free interest rates(annualized, continuously compounded) are 5% and 7.5%,respectively. Answer the following questions. A. What is the no arbitrage forward price of the British Poundfor a 6-month forward contract? B. Suppose the actual forward price is 1.65 dollars per BritishPound. Illustrate the arbitrage opportunity. . . .

You are currently 35 years old and plan to retire at 65. Youwill need 25 yearly payments of \$150,000 Fair interest rate is 7% annually Inflation is 3% per year (the real rate is 3.89%) N=30 FV=\$2,370,796.47 PV=0 Rate= 3.89% PMT= \$43,054.18 1) The annual payments you calculated above are in real dollars.Since your first annual investment will be made next year, what isthe nominal (actual) amount you need to invest next year to accountfor inflation? 2) Based on the assumptions in the problems above, how much willyou need in your retirement account in nominal dollars when youretire at age 65? 3) Based on the assumptions in the problems above, what amountwill you withdraw from your retirement account on your66th birthday, the first year of retirement, in nominaldollars? On your 85th birthday? 66th Birthday – \$ 85th Birthday – \$ .

At an interest rate of 14 percent annually, how long will ittake for a \$1,000 to double? To triple? (Round your answersto 2 decimal places.)

You just won the \$41 million lottery. You will receive \$1.8million a year for the next 15 years plus an additional payment of\$14 million at the end of 15 years. The interest rate is 11percent. How much is your lottery prize worth today? (Enter youranswer as a positive number rounded to 2 decimal places.)

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