I ONLY NEED 1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.

I ONLY NEED 1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.

I ONLY NEED 1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.

FIN
312-1M

1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.
Name ____________________________________________________
Score______________

1)
You
want to buy a car 3 years from now and plan to save $4,200 per year, beginning
one year from today. You will deposit
your savings in an account that pays 5.2% interest. How much will you have in the account just
after you make the third deposit, 3 years from now?

2)
Bank
A has quoted you a 5.83% nominal interest rate for a loan. The loan is compounded monthly. Bank B charges 5.8% interest compounded
weekly. Which bank should you borrow
from?

3)
You
have just borrowed $6,372.90 to finance the purchase of a used car. The nominal annual interest rate is 12
percent. You have agreed to repay the
loan over a two-year period by making monthly payments. What is the monthly payment on this loan?

4)
Your
father is about to retire and he wants to buy an annuity that will pay him
$85,000 per year for 25 years, with the first payment coming immediately. The interest rate is 5%. How much will it cost him to buy the annuity
today?

5)
You
expect to receive an inheritance of $200,000 in 30 years. If the interest rate is 9%, what is the
inheritance worth today?

6)
You
plan to make a series of deposits into an interest-bearing account earning 11%. You will deposit $2,000 today, $3,000 two
years from today, and $9,000 five years from today. If you withdraw $2,000 four years from today
and $5,000 seven years from today, how much will you have at the end of eight
years?

7)
How
much would you pay for an investment that promises to pay you $500 at the end
of each year for the next three years and $600 at the end of years four through
six if you require a 10% return?

8)
The current
dividend of Yellowjacket Corporation is $2.80 per share. This dividend is expected to grow at an
annual rate of 5 percent per year for the foreseeable future. The required rate of return is 9%.

a. What is the current value of this stock?

b.
If the stock sold
for $98, what is the rate of return?

9)
ABC cumulative
preferred stock is currently selling for $84 with a dividend of $5.46. What is the rate of return?

10) XYZ, Inc. is planning to offer a $1,000 face value 10-year
bond with a coupon rate of 8%. The
coupon payments are made semi-annually. If
you require a 10 percent rate of return, what is the price you would pay for
this bond?

11) XYZ Inc. has a capital structure
that consists of 40% debt and 60% common stock.
Dividends are growing at a constant rate of 5% and the current dividend
is $2.00. The stock is currently selling
for $21.88. The before tax cost of debt
is 14% and the firm’s marginal tax rate is 40%.

a.
What
is the rate of return on the stock?

b.
Using
the rate of return on the stock as the cost of equity, what is the weighted
average cost of capital (WACC)?

12)XYZ common stock is expected to pay a
dividend of $2.75 next year and currently sells for $44.
Dividends are expected to grow at a constant rate forever. Determine the growth rate assuming that the
required rate of return is 12.25%.

13)Merton Enterprises pays a constant $5
dividend on its stock. The company will
maintain this dividend for the next 10 years and then cease paying dividends
forever. If your required rate of return
is 8 percent, what is the value of this stock?

14)Using the capital asset pricing model
(CAPM), what is the required rate of return on a stock if the risk-free rate of
return is 5%, the return on the market is 11%, and beta is equal to 1.2?

15) Briefly explain the difference between
systematic risk and unsystematic risk.
Is it possible to eliminate either type of risk through
diversification? Explain why or why not? Which type of risk is measured with beta?

 

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