Question

question2

Assume the total cost of a university education will be $50 000 when your child enters university in 10 years. You presently have $1 000 to invest. What annual rate of interest (%, to 2 decimals) must you earn on your investment to cover the cost of your child’s university education?

Question 3

You expect to receive $40 000 at graduation in four years. You plan on investing it at 5% until you have $100 000. How long (years to 2 decimals) will you wait from now?

Question 4

After carefully going over your budget, you have determined you can afford to pay $2 000 per month towards a new flat. You call up your local bank and find out that the going rate is 1% per month for 480 months. How much can you borrow?

Question 5

As a lender, you want to earn 5% on a particular loan. You want to quote a rate that features Monthly compounding. What rate do you quote? (%, to 2 decimals)

Question 6

You are to make monthly deposits of $400 into a retirement account that earns an APR of 5% compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 31 years?

Question 7

You want to buy a new sports car from Muscle Motors for $50 000. The contract is in the form of a 48-month annuity due (payments are at the beginning of each month) at a 4% APR. What will your monthly payment be?

Question 8

Deddington Teddies Corporation has bonds on the market with 8 years to maturity, a YTM of 4.1% and a current price of $945. The bonds have a face value of $1000 and make half-yearly payments. What must the coupon rate be on Deddington Teddies’ bonds?

Question 9

Bond D is a discount bond with a 4% coupon rate. The bond makes annual payments, have a YTM of 8% and have five years to maturity. What is the current yield for bond D? If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D? Assume a face value of $1 000.

Question 10) A firm is expected to increase dividends by 10% in Year 1 and by 12% in Year 2. After that, dividends will increase at a rate of 5% per year indefinitely.

If the last dividend was $1 and the required return is 21%, what is the price of the share?

Answer 1