1. Jack rabbits has saved $9,000 annually for the last 35 years in an account earning 8%. If Jack estimates that he will live for another 25 years, how much would he be able to start withdrawing annually for his retirement (8% interest).
2. Reading a stock quote, you see that builtrite pays a $2.00 dividend and has a PE OF 16. You also note that builtrite pays out half of its earnings as dividends. What is the price of Builtrite's stock?
3.What is the value of a $100 par value preferred stock with a 4.0% coupon if investors require a 5% return?
4. Builtrite company has been generating stable revenues but sees no growth in it for the foreseeable future. The company's last dividends was $3.25, and it is unlikely to change the amount paid out. If the required rate of returns is 12 percent, what is the stock worth today?
5. Jay Aquire is considering the purchase of the following: a builtrite, $1000 par, 6 7/8% coupon rate, 15 year maturity bond which is currently selling for $1020. If jay purchases this bond for the quoted price and holds the bond for 5 years when current market interest rates are 8%, what should he expect to sell the bond for?