Problem 1: You invest in an investment that pays 22 equal annual payments of $70 at the beginning of each of the next 22 years. What is the present value of this investment given a discount rate of 2% under annual compounding? Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Problem 2: What is the most that a rational investor would be willing to pay for an investment that pays $555 five years from today? This investor uses a discount rate of 5% and quarterly compounding for investments of this risk. Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Problem 3: If you pay $35 at the end of every month into an ordinary savings account that pays 4% interest, how much money will you have after 40 years? Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Problem 4: What is the future value of $1, one year from today, using an interest rate of 3% and quarterly compounding? Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Problem 5: What is the value of a share of common stock that just paid a dividend of $3 and has a growth rate of 7%. Your RRR is 10%. Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Problem 6: What is the value of a share of preferred stock with a face value of $45 that pays a dividend rate of 5%? Your RRR for this investment is 9% Choose and place on the answer sheet the best answer from those provided below and attach your supporting work.
Provided Answers:
Not all of the provided answers will be used and some may be used more than once.
a. $2,685.06 b. $817.57 c. $107 d. $1,260.78
e. $689.33 f. $833.92 g. 4.6 years h. $3,534.17
i. $41,368.65 j. LBO k. $338 l. TVM
m. $1,332.25 n. 4.66% o. $1.87 p. $432.90
q. $25 r. 6.9 years s. $1.03 t. None of the above