1. Jackie would like to buy a car when she graduates from college. Her grandmother would like to fund that purchase by making a single deposit today into an account earning 5.0% per year. How much would grandma need to deposit in order for Jackie to be able to purchase a $30,000 car upon her graduation four years from today?
2. Mary is setting aside $35,000 for investment in her own business when she completes her MBA degree five years from today. If Mary puts the money into an account earning 3.0% compounded semi-annually, how much will she have at the end of the five years to invest into her business?
3. A bond pays annual interest of $5,000 per year for each of the next ten years. There is no payback of principle. At what price will the bond sell if investors require a 8.0% return on their investment in the bond?
4. Roger is saving money for a car that he would like to purchase five years from today. He plans on making five equal annual deposits into an account earning 4.0% interest, beginning today. How much will Roger have to spend on the car if he can deposit $4,000 each time?
5. A stock currently pays a dividend of $2.30 per share, which is expected to grow to $2.40 next year. The stock currently sells at $41.40. What is the expected return on this investment?
6. A stock has an historical average return of 9.8%, and standard deviation of 8.8%. The market is expected to earn a 9.7% rate of return, and has a standard deviation of 5.9%. The stock's beta coefficient is 1.35, and the risk free rate of return is 3.5%. What is the required return for this stock investment using the capital asset pricing model?
7. A five-year corporate bond with a face value of $10,000 pays interest at a coupon rate of 5.0%. The required return for investing in this bond is 4.0%. At what market price will the bond sell if the interest is paid semi-annually?