1. Hans placed $5,000 in a trust fund for Leonore. In 10 years the fund will be worth $10,000. What is the effective annual rate of return on the trust fund?
A. 5.95%
B. 6.21%
C. 6.50%
D. 6.70%
E. 6.92%
F. 7.18%
G. 8.01%
H. 8.50%
I. None of the above
2. Enterprise Inc. has a dividend yield of 4%. The stock currently trades for $30 and the dividend is expected to grow at 2% annually. What is the annual required return on the stock?
A. $1
B. $2
C. 2%
D. 3%
E. 4%
F. 5%
G. 6%
H. 8%
I. None of the above
3. One Weed One Planet is a new company with lots of growth potential. You believe that the company will pay no dividend for the next 10 years. Subsequently, you estimate the company will pay a $1 quarterly dividend that will then grow at 0.5% each quarter. How much are you willing to pay for the stock if your required annual return is 20% with quarterly compounding?
A. $30.00
B. $28.84
C. $25.01
D. $22.18
E. $20.00
F. $18.28
G. $16.75
H. $3.16
I. None of the above
4. Leonore wants to ask for Fidelio’s hand in marriage. She is able to pay $250 at the end of each month for 6 years. If the interest rate is 8 percent annually with monthly compounding (an APR), how much can she afford to borrow to purchase Fidelio an engagement ring?
A. $1,450.23
B. $2,394.33
C. $5,230.03
D. $7,483.00
E. $10,001.99
F. $14,258.63
G. $16,154.54
H. $79,320.94
I. None of the above