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Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. The couple expects tuition, books and living expenses to cost $60,000 per year in their child’s first year, and to increase at 4% per year for four years. Assume college payments are made at the end the year (i.e. the freshman payment is made at the end of freshman year, etc.) and that the baby will start college on her 18th birthday.
a) Assuming college savings are invested in an account paying 7% interest, then what is the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education if the parents don’t want to save any more after her 18th birthday?
b) The couple plans to start saving at the end of the year (i.e. on the child’s first birthday) and to save through the 18th birthday. How much do they need to save every year to have enough money in 18 years to pay for college? (they will not save any more after the 18th birthday)
c) If the couple plans to make one savings deposit every TWO years, starting on the child’s second birthday and ending on her 18th birthday, how much will they need to save every two years?
Suppose the Federal Reserve increased deposits by $100 billion, but the reserve requirement on all deposits was 100%. What impact would the change in deposits have on the money supply?
Javits & Sons' common stock currently trades at $29.00 a share. It is expected to pay an annual dividend of $2.00 a share at the end of the year (D1 = $2.00), and the constant growth rate is 7% a year. What is the company's cost of common equity if a..
It will cost $3,600 to acquire a small ice cream cart. Cart sales are expected to be $2,800 a year for four years. After the four years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the pa..
Then apply those requirements to do an analysis of Brinker International, which is a real company. Don't complete the mini case itself, just Brinker. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most rec..
For the following investments, state which would always be preferred by a rational investor (assuming that these are the only investments available to the investor):
Company Omega is undertaking a major investment. It is expected to cost 1 million in initial investment at t = 0, 1 million at t = 1 and 1 million at t =2. The investment is expected to generate at the end of year t = 2 a dividend flow of 1.0 milli..
The numbers on the bottom area of a check which shows the bank identification number is also known as a transit routing number. check imaging number. batch settlement number. scanning image number
On Dec 31 an investor longs 18 contracts of Gold with a settlement price of 1185.40. What is the investors overall profit/loss? The contract size is 100 troy oz
assuming interest rates are 5 for aaa rated corporate bonds calculate the value of your bond relative to this interest
How is relevant costing used in decision making? What would the relevant costs be in deciding whether to discontinue a segment of business? What would the relevant costs be in deciding how to optimize use of a constrained resource?
Suppose the spot price for Euro is $1.15, the futures price for delivery in 6 months is $1.1471286. Assume that the 6 month borrowing/lending rate in Euro is 0.75percent (annually, continuous compounding) and the corresponding rate in $ is 0.25percen..
Stock Y has a beta of .98 and an expected return of 10.30 percent. Stock Z has a beta of .80 and an expected return of 9 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
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