Qusetion: You are offered the opportunity to buy a note for $12, 800. The note is certain to pay $2,000 at the end of each of the next 10 years. If you buy the note, what rate of interest will you receive? Assume capital markets are perfect.
You need $25,000 five years from now.
If you budget to make equal payments at the end of every year into an account that pays an annual interest rate of7 percent. what are your annual payments?
Now assume you have up to $20,000 today to set aside in savings. How much of it must you put into the same account as a lump sum today to meet your goal?
The Highest Potential, Inc., will pay a quarterly dividend per share of $1 in each of the next 12 quarters. Subsequently, the dividend will grow at a quarterly rate of 0.5 percent indefinitely. The appropriate rate of return on the stock is 10 percent. What is the current stock price? Assume capital markets are perfect.