Problem Set 7
1. Calculating Net Asset Value. Given
the information below, calculate the net asset value for the Boston Equity
mutual fund.
|
Total assets |
$225,000,000 |
|
Total liabilities |
5,000,000 |
|
Total number of shares |
4,400,000 |
2.
Calculating the Rate of Return of Investment Using Financial Leverage.
Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage
with an interest rate of 8.5 percent. If after three years he sold the property
for $120,000.
a. What is his gross profit?
b. What is his net profit/loss?
c. What
is the rate of return on investment?
3. Shelly’s assets include money in the
checking and savings accounts, investments in stocks and mutual funds, personal
property, such as furniture, appliances, an automobile, coin collection and
jewelry. Shelly calculates that her
total assets are $108,800. Her current
unpaid bills, including an auto loan, credit card balances, and taxes total
$16,300. Calculate Shelly’s net worth.
4. Barry
and his wife Mary have accumulated over $4 million during their 45 years of
marriage. They have three children and
five grandchildren.
A- How much money can Barry and Mary gift to
their children in 2008 without any gift tax liability?
B- How much money can Barry and Mary gift to
their grandchildren?
C- What is the total amount of estate removed
from Barry and Mary’s estate?
5. Dave bought a rental property for $200,000
cash. One year later, he sold it for $240,000.
A- What was
the return on his $200,000 investment?
B- Suppose Dave invested only $20,000 of his
own money and borrowed $180,000 (interest free from his rich father). What was
his return on investment?
