Questions -
Q1. Sara Shouppe has invested $100,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. If the bank has promised Ms. Shouppe a 10% return, how much will they have to pay her each year?
Q2. Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement?
Q3. Gary Kiraly wants to buy a new Italian sports car in three years. The vehicle is expected to cost $80,000 at that time. If Gary should be so lucky as to find an investment yielding 12% over that three-year period, how much would he have to invest now in order to accumulate $80,000 at the end of the three years?
Q4. Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment?
Q5. Kimberly Ford invested $10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? Use n= 40 and i= 4% since its quarterly. If we used n=10 and i=16%, what would the accumulation be?
Q6. In January, 1998, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2008 for a total of $9,715.02. Calculate Harold's annual rate of return.
Q7. expert The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns?
Q8. Sponge Bob will receive a payment of $5,000 per year for 7 years . At a discount rate of 9 percent, what is the present value of this annuity?
Q9. The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return (market yield) on bonds is 10% (this is your discount rate) , what is the current price of:
a) the bonds with 3 years to maturity?
b) the bonds with 10 years to maturity?
c) which bond issue has the greater risk? why?