Ch 6

you have received a share of preferred stock that pays an annual dividend of $10. similar preferred stock issues are yielding 22.5%. what is the value of this share of preferred stock?

$10/.225= $44.44

You have won the lottery and will receive 20 annual payments of $10,000 starting today. If you can invest these payments at 8.5%, what is the present value of your winnings? (Round the final answer to the nearest dollar.)

$102,677 (set calc to beg)

Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

$124,868

James Perkins wants to have a million dollars at retirement, which is 15 years away. He already has $200,000 in an IRA earning 8 percent annually. How much does he need to save each year, beginning at the end of this year, to reach his target? Assume he could earn 8 percent annually on any investment he makes. (Round to the nearest dollar.)

$13,464 (didn't try)

you are purchasing a used car and will make 5 annual payments of $3500 starting one year from today. if your funds could be invested at 9%, what is the present value of the car?

$13,614

Robert White will receive from his investment cash flows of $4,450, $4,775, and $5,125. If he can earn 7 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years? (Round to the nearest dollar.)

$15,329 but idk how

Stuart Weddle's father is 55 years old and wants to set up a cash flow stream that would be forever. He would like to receive $15,000 every year, beginning at the end of this year. If he could invest in account earning 9 percent, how much would he have to invest today to receive his perpetual cash flow? (Round to the nearest dollar.)

$166,667

Tim Dodson has borrowed $8,600 to pay for his new car. The annual interest rate on the loan is 9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment if he begins his payment beginning now? (Round to the nearest dollar.)

$2,448 change to bgn

Newship Inc. has borrowed from its bank at a rate of 8 percent and will repay the loan with interest over the next five years. Its scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

$2,815,885

Foodelicious Corp. is evaluating whether it should take over the lease of an ethnic restaurant in Manhattan. The current owner had originally signed a 25-year leaseof which 16 years still remain. The restaurant has been growing steadily at a 7 percent growth for the last several years. Foodelicious Corp. expects the restaurant to continue to grow at the same rate for the remaining lease term. Last year, the restaurant brought in net cash flows of $310,000 If the firm evaluates similar investments using a15 percent discount rate , what is the present value of this investment? (Round to the nearest dollar .)

$2,838,182 (still need try)

you are evaluating a growing perpetuity investment from a large financial services firm. the investment promises an initial payment of $20000 at the end of this year and subsequent payments that will grow at a rate of 3.4 percent annually. if you use a 9% discount rate for investments like this, what is the present value of this growing perpetuity?

$20000/(.09-.034)= $357,143

what is the value of this 20 year lease? the first payment, due one year from today is $2000 and each annual payment will increase by 4%. the discount rate used to evaluate similar leases is 9%.

$24,361 try using the formula

Sid Phillips has funded a retirement investment with $250,000 earning a return of 6.75 percent annually. What is the value of the payment that he can receive in perpetuity? (Round to the nearest dollar.)

$250000*.0675= $16,875

Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing to invest $320,000 in an account earning 11 percent. What will be the annual scholarship that can be given from this investment? (Round to the nearest dollar.)

$35,200 320000*.11

Krysel Inc. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows: 1 2 3 4 5 $663,547 $698,214 $795,908 $798,326 $755,444 If they can reinvest these cash flows to earn a return of 9.2 percent, what is the future value of this cash flow stream at the end of five years? (Round to the nearest dollar.)

$4,429,046 FV5 = $663,547(1.092)4 + $698,214(1.092)3 + $795,908(1.092)2 + $798,326(1.092)1 + $755,444 = $943,544.19 + $909,193.80 + $949,091.64 + $871,771.99 + $755,444.00 = $4,429,045.62

Nick invested $2,000 in a bank savings account today and another $2000 a year from now. If the bank pays interest of 10 percent per year, how much money will Nick have at the end of two years?

$4,620

Dawson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5 percent. It plans to repay the loan in eight equal installments, beginning in a year. What is its annual loan payment? (Round to the nearest dollar.)

$4,939

you are starting college this month, and your favorite aunt has agreed to give you $4000 at the end of each of your four years and you can save $8000 at the end of each year for the first two years after you graduate. if all of these amounts are invested at 14%, how much will you have to start graduate school, six years from now?

$42,702 but idk how

Milner is saving for her retirement. She will make a deposit into her IRA account at the end of each quarter for the next 36 years. The expected return on the account is 8%. How much will she have to deposit each quarter to have $650,000 in the account when she retires 36 years from today? (Round the final answer to the nearest two decimals.)

$796.81

an investment pays 18 percent interest compounded quarterly. what is the effective annual interest rate?

19.3% use calc

which of the following statements is true of annual percentage rate (APR)?

The APR is similar to quoted interest rate which is a simple annual rate.

which of the following statements is true of amortization?

The amortization schedule provides principal, interest, and unpaid principal balance for each month.

Raymond Bartz is trying to choose between two equally risky annuities, each paying $5,000 per year for five years. One is an ordinary annuity, the other is an annuity due. Which of the following statements is most correct?

The present value of the annuity due exceeds the present value of the ordinary annuity, and the future value of the annuity due also exceeds the future value of the ordinary annuity.

the truth-in-lending act requires borrowers to disclose the:

annual percentage rate (APR)

which of the following is NOT a typical way in which interest rates are quoted in the marketplace?

discounted interest rate (other answers ARE typical ways i guess lol - interest rate per period - quoted interest rate - EAR)

the true cost of borrowing is the

effective annual rate

the present value of an annuity due is less than the present value of an ordinary annuity

false

to calculate the future value of a series of cash flows, we add up all the cash flows and then calculate their compounded value at the given rate of interest

false

Surreal Corp. has borrowed to invest in a project. The loan calls for a payment of $17,500 every month for three years. The lender quoted Surreal a rate of 8.40 percent with monthly compounding. At what rate would you discount the payments to find amount borrowed by Surreal Corp.? (Round to two decimal places.)

find EAR 8.73%

anna will receive $15000 from a bank deposit in 2 years which has an interest rate of 3.5%. the amount of $15000 represents the:

future value

the present value of multiple cash flows is:

less than the sum of the cash flows.

a consul, issued by the british government to finance the napoleonic wars is an example of:

perpetuity

a preferred stock would be an example of:

perpetuity

in a typical loan amortization schedule involving a consumer loan, the amount of each loan payment is fixed.

true