Problem 1: You will require $700 in 5 years. If you earn 5 percent interest on your funds, how much will you need to invest today to reach your goal?
a. $575.34
b. $548.47
c. $545.44
d. $573.35
Problem 2: You deposit $1,000 in your bank account. If the bank pays 4 percent compounded interest, how much will you accumulate in your account after 10 years?
a. $1,400
b. $1,500
c. $1,480
d. $1,343
Problem 3: A General Motors bond carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 7 percent. At what price does the bond sell for?
a. $1,065
b. $1,108
c. $1,080
d. $1,040
Problem 4: Given two projects what are the decision models that you can use to make a decision as to which project you should accept? Which is the better?
Problem 5: Why do companies pay dividends? In what ways can dividends be paid? How do companies decide on dividend payments?
Problem 6: In what ways is preferred stock like long-term debt? In what ways is it like common stock?
Problem 7: When securities are issued (IPO) what is the role of the underwriter?
Problem Show work
Problem 8: Presented are two mutually exclusive projects under consideration by the BUILDERS-R-US Company:
Year Project A Project B
0 -30,000 -50,000
1 10,000 15,000
2 10,000 15,000
3 10,000 15,000
4 10,000 15,000
The cost of capital is 10%.
A) Payback period
B) NPV
C) IRR