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A young couple is planning for the education of their two children. They plan to invest the same amount of money at the end of each of the next 16 years. The first contribution will be made at the end of the year and the final contribution will be made at the end of the year the older child enters college. The money will be invested in securities that are certain to earn a return of 8% each year. The older child will begin college in 16 years and the second child will begin college in 18 years. The parents anticipate college costs of $25,000 a year (per child). These costs must be paid at the end of each year. If each child takes four years to complete their college degrees, then how much money must the couple save each year?
a. $ 9,612.10
b. $ 5,477.36
c. $12,507.29
d. $ 5,329.45
e. $ 4,944.84.
Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 47%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.5%, and one..
A stock has a beta of 2.0; the risk-free rate of return is 7%, and the expected return on the market portfolio is 12%. If this stock's expected return is 18%, the share are_____and their price will _____?
We are evaluating a project that costs $1034668, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 43281 units per year. What is the NPV of the proj..
A 7.65 percent coupon bond with 16 years left to maturity is offered for sale at $1,030.00. What yield to maturity is the bond offering?
How to tell if a company has operating exposures? Is the product price elastic? Why? How do you use the pricing strategy to reduce your operating exposures? Briefly Explain.
Oil Wells offers 6.5 percent coupon bonds with semiannual payments and a yield to maturity of 6.94 percent. The bonds mature in seven years. What is the market price per bond if the face value is $1,000?
Banks have increased their profits by:
ABC Corp has the opportunity to invest $1 million now (t=0) and expects after-tax returns of $600,000 in t=1 and $700,000 in t=2. The project will last for two years. The appropriate cost of capital is 12% with all-equity financing, the borrowing rat..
You have your choice of two investment accounts. Investment A is a 12-year annuity that features end-of-month $1,300 payments and has an interest rate of 7.1 percent compounded monthly. How much money would you need to invest in B today for it to be ..
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,053, and currently sell at a price of $1,101.31. What is their nominal yield to maturity? What is their nominal yield to ..
You bought a semiannual interest rate cap on $8 million notional with K = 3% (annually, rate quotes are almost always in annual terms). Today is one of the interest settlement dates and you realize that six months ago the (annual) LIBOR rate was 4%. ..
URGENT: A house is priced at $125,000. A down payment of $25,000 has been made. Equal payment will be installed every month, so that the loan can be repaid in 10 years. The annual interest rate is 12.00%, compounded monthly. What is the monthly payme..
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