1. What is the present value of the following annuity $3,318 every year at the end of the year for the next 15 years, discounted back to the present at 5.90 percent per year, compounded annually?
2. Your best taxable investment opportunity has an EAR of 4.8%. Your best tax-free investment opportunity has an EAR of 2.6%. If your tax rate is 30%, which opportunity provides the higher after-tax interest rate?
3. A stock is expected to pay a dividend of $2.75 at the end of the year, and it should continue to grow at a constant rate of 5% a year. If its required return is 15%, what is the stock's expected price 4 years from today?