Mini Case Chapter 4
The first step is to calculate the present value of the annuity which is $40,000 annually for two and a half decade commencing today.
Formula: PV = PMT / i [1 - 1 / (1 + i) ^n] (1 + i)
PMT = $40,000.00, i = 8.00%, n = Number of Years = 25
PV = 40,000.00 / 0.0800 [1.00 – 1.00 / (1.00 + 0.0800) ^ 25.00] (1.00 + 0.0800)
PV = $461,150.00
Therefore, there should be $461,150.00 in the account so that yearly reimbursement of $40,000.00 can be withdrawn on yearly basis.
Delegate your assignment to our experts and they will do the rest.
Future Value of $100,000.00 at 8.00% interest for ten Years = 100,000.00 x (1.00 + 0.0800) ^10.00 = $215,893.00
So, additional $245,257.00 (461,150.00 - 215,893.00) is required.
Comprehending Healthcare Financial Management
Formula to determine annuity of future value: FV = PMT / i [(1 + i ) ^ n - 1]
245,257.00 = PMT / 0.08 [(1.00 + 0.0800) ^10.00]
PMT = $16,930.00
So, $16,930.00 is required to be deposited at conclusion of each year for 10 Years.
Mini Case Chapter 5
| A. Calculate the expected rate of return on each alternative: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
T-Bills ERR =Sum product((0.100+0.200+0.400+0.200+0.100), (8.00+8.00+8.00+8.00+8.00))=8% Alta ERR = Sum product (0.100+0.200+0.400+0.200+0.100), (-22.00%+-2.00%+20.00%+35.00%+50.00%))=17.400% Repo ERR =Sum product (0.100+0.200+0.400+0.200+0.100), (28.00%+14.700%+0%+-10%+-20%))=1.7% American ERR =Sum product (0.100+0.200+0.400+0.200+0.100), (10.00%+-10.00%+7%+45%+30%)) =13.800% Market Port ERR =sum product (0.100+0.200+0.400+0.200+0.100), (-13%+1.000%+15.000%+29.00%+43.0%)) =15.000% Alta ERR=sum product (0.100+0.200+0.400+0.200+0.100), (3.000%+6.400%+10.000%+12.500%+15.00%)) =9.600% Healthcare Financial ManagementB. Calculate the standard deviation of returns on each alternative. See below C. Calculate the coefficient of variation on each alternative. See Below D Calculate the beta on each alternative. See below
Healthcare Financial Management |
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Healthcare Financial Management
Healthcare Financial Managemente. Do the SD, CV, and beta produce the same risk ranking? Why or why not?
f. Suppose you create a two-stock portfolio by investing $50,000 in Alta Industries and $50,000 In Repo Men. Calculate the expected return, standard deviation, the coefficient of variation, and The beta for this portfolio. How does the risk of this two-stock portfolio compare with the risk of the individual stocks if they were held in isolation? Alta Inds. Has a higher standard deviation when making an individual comparison of risk Repo Men and Alta Inds. But the expected return rate should quiet be high. And portfolio is equally weighted, but the Repo Men have returns which are low with a higher risk due to the large deviation. When these portfolios are together joined with low rate returns and risk lessons which are calculated Repo Men individually. |
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Mini Case Chapter 6
| A. What is the value of a ten-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10%? |
Annual Coupon (PMT) @ 10.00% of 100
Face Value $1,000.00
Current price of bond - ($1,000)The required rate of return 10.00%
Maturity of bonds 10.00
PV (10%, 10, 100, 1000.00)
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B. What would be the value of the bond described in question a? If, just after it had been issued, the expected inflation rate rose by three percentage points, causing investors to require a 13 percent return? Would we now have a discount or a premium bond? Maturity of bonds 10.00 Annual Coupon(PMT) @ 10.00% of 100.00 Face Value $1,000.00 Healthcare Financial ManagementRequired rate of return 13.00% Current price of bond -($837.2100) PV(13%,10,100,1000.00) |
| C. What would be the value of the bond described in question a? If, just after it had been issued, the expected inflation rate fell by three percentage points, causing investors to require a 7 percent return? Would we now have a discount or a premium bond? |
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Annual Coupon(PMT) @ 10.00% of 100 Face Value $1,000.00 Required rate of return 7.00% Maturity of bonds 10.00 Current price of bond -($1,210.7100) PV(7%,10,100,1000.00) D. What would happen to the value of the ten-year bond over time if the required rate of return remained at 13 percent, remained at 7 percent, or remained at 10 percent? Graph your results using the table below: |
Healthcare Financial Management
$1,000.00
A B C D
| Value of bond | In given year | ||
| N | 7.00% | 10.00% | 13.00% |
| 0 | $1,211.00 | 1,000.00 | 837.00 |
| 1 | $1,195.00 | 1,000.00 | 846.00 |
| 2 | $1,179.00 | 1,000.00 | 856.00 |
| 3 | $1,162.00 | 1,000.00 | 867.00 |
| 4 | $1,143.00 | 1,000.00 | 880.00 |
| 5 | $1,123.00 | 1,000.00 | 894.00 |
| 6 | $1,102.00 | 1,000.00 | 911.00 |
| 7 | $1,079.00 | 1,000.00 | 929.00 |
| 8 | $1,054.00 | 1,000.00 | 950.00 |
| 9 | $1,028.00 | 1,000.00 | 973.00 |
| 10 | $1,000.00 | 1,000.00 | 1,000.00 |
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$1,211.00 = Equations: =PV ($B$100, 10-0,-100,-1000) and so on. e. What is the yield to maturity on a ten-year, 9 percent annual coupon, $1,000 par value bond that sells for $887.00? |
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Yield to maturity
Market price $887.00
Face value $1000.00
Healthcare Financial Management
YTM 10.9100%
Periods 10.00
Coupon rate-annually 9.00%
Rate (10.91,-887, and 1000)
| f. What are the total return, the current yield, and the capital gains yield for the bond in question e.? (Assume the bond is held to maturit, and the company does not default on the bond.) |
Total Return (YTM) = capital gain yield + Current yield,
Capital gain yield = 10.91-10.15 = 0.7600%
Current yield = 90/887 = 10.1500%
References
Petratos, P. (2018). Why the economic calculation debate matters: the case for decentralisation in healthcare. In Marketisation, Ethics, and Healthcare (pp. 13-31). Routledge.
