1. Calculate the following:

a. The future value of $500 invested at 8% for 4 years with annual compounding.
b. The future value of $500 invested at 8% for 4 years with quarterly compounding (i.e. there will be sixteen time periods).

2. You have just received a simple interest loan for $1500. The terms of the loan are five years, the interest rate is 9%. You make equal annual principal payments and annual interest payments on the existing principal balance for the preceding year.

a. Create and depict a cash-flow time line that represents a) receipt of the loan, b) interest payments, and c) annual principal payments.
b. How much interest will you pay on this simple interest loan?

3. You have a second loan for $30,000 with 7% annual interest, a term of ten years, and quarterly payment schedule.

a. Calculate the amortized quarterly payments required to pay interest owed and retire the loan in ten years.
b. What is the loan’s principal balance after eight years of payments?

4. Parsippany Health Services has just received a litigation settlement. It will receive $9 million in fifteen equal installments from the State of New Jersey beginning one year from today and continuing through 2029.

a. If the rate of return is 5% annually, what is the present value of the $9 million settlement?
b. If the rate of return is 8% annually, what is the present value of the $9 million settlement?
c. Explain why one settlement has a higher present value than the other (Hint: Estimate the discounted present values of the payment one year from now at 5% and 9% rates of interest respectively).

5. Consider the following Budgets from the Bloustein Clinic:

Bloustein Clinic Budget for FY2015
Figures in millions    Static Budget       Flexible Budget    Actual Results
Revenues                   $26.1                      $29.3                   $28.4
Costs                         $25.4                         $28.5                   $26.9
Profits                            $0.7                         $0.8                      $1.5

a. Calculate and interpret the Profit Variance
b. Caclulate and interpret the Revenue Variance
c. Calculate and interpret the Cost Variance (hint page 273 may be most helpful for this question.

6. Using the data from the Table in Question 5,

a. Calculate and interpret the Volume Variance component of the Revenue Variance (which you derived in Question 5)
b. Calculate and interpret the Price Variance component of the Revenue Variance (Hint, page 274).

7. Using data from the Table in Question 5,

a. Calculate and interpret the Volume Variance component of the Cost Variance.
b. Calculate and interpret the Management Variance (some might call it “Management’s Response” variance) of the Cost Variance.

8. Mick Jagger and Professor Beamer own the same bonds with a par value of $1000 and an annual “coupon” interest rate of 12%. Mick Jagger’s tax rate is thirty percent and Professor Beamer’s tax rate is ten percent. What is the after tax yield (expressed as a percentage) for each gentleman’s bond interest payment?

9. (True of False, if false make it true) A health care agency or company may seek to partner with a municipal government to finance construction of a facility because bonds issued by municipal governments are not subject to federal income tax.

10. New England Home Health is evaluating offering an eight-year bond with par value of $1000 that would pay $80 in annual interest.

a. What is the market value of each bond if the required interest rate is 6%?
b. What is the market value of each bond if the required interest rate is 9%?
c. What is the market value of each bond if the required interest rate is 4%?

1. Calculate the following: a. The future value of $500 invested...