How much would you be willing to pay today

Assignment Help Financial Management

Reference no: EM131976039

1. If you make an annual end-of year deposit of $200 to your retirement account for twenty years, and the account earns 15% per year, how much will you have available for retirement twenty years from today.

$20,488

$ 4,000

$10,821

$40,000

2. You pay $20 to get $28 one year from today. What is your return on investment?

40%

108%

140%

80%

3. You deposit $50 in the bank today and three years later you have $61.25 in the bank. What annual rate of interest did the bank pay you over the three-year period?

10%

22%

4. What would you pay for a stock which just paid a $5 dividend (D0) if the expected dividend and earning growth rate is 4% and you require a 16% return on your investment?

$33

$43

$51

$77

5. If you were offered $10 ten years from today and you can earn 20% on your investments, how much would you be willing to pay today for the $10.

$10.00

$12.00

$1.61

$5.20

6. If you pay $1,000 for the privilege of receiving $199.25 for each of the next ten years, what interest rate are you earning on your money?

15%

10%

11%

21%

7. The current price of Houston Tennis Inc. Stock is $50. Dividends are expected to grow at 4% indefinitely and last dividend was $2.0. What is the required rate of return on Houston Tennis Inc.?

8.2 %

9.1%

10%

11.6%

8. One of the basic relationships in interest rate theory is for a given change in yield to maturity, the ______________ the time to maturity, the _____________ the change in price.

longer; smaller

shorter, greater

shorter, larger

longer; greater

none of the above

9. How much is $100 worth two years from now with quarterly compounding at a stated 12% rate.

$138.22

$112.0

$126.67

125.94

10. How much would you be willing to pay for an investment which paid you $100 at the end of each year for seven years? Assume you can earn 12% a year on other types of investments.

$456.37

$360.45

$612.21

$700.00

11. Which of the following types of compounding will cause a deposit of money to increase most rapidly?

annual

semi-annual

quarterly

daily

Reference no: EM131976039

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