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You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,150 per month in a stock account in real dollars and $540 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 13 percent, and the bond account will earn 6 percent. When you retire, you will combine your money into an account with an effective return of 8 percent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 3 percent.
1. How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
2. What is the nominal dollar amount of your last withdrawal? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Let the probability of success on a Bernoulli trial be 0.30. a. In five Bernoulli trials, what is the probability that there will be 4 failures? (Do not round intermediate calculations. Round your final answers to 4 decimal places.) Probability b. In..
A non-dividend-paying stock has a futures contract with a price of $71.5 and a maturity of six months. If the risk-free rate is 4.1 percent, what is the price of the stock?
Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. what will be its total dividend payment?
Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 9.47%
Within a given distribution channel, the following information is available concerning trade margins and costs. A wholesaler has a unit selling price of $875 and a unit cost of $493. The retailer requires a 50% mark up on selling price. The manufactu..
Despite group of companies is a rapidly growing chain of retail outlets offering brand name merchandise at discount price. A security analysts report issued by a national brokerage firm indicates that debt-yielding 10% compose 60% of the company’s ov..
Bond Valuation-In 2013, Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 8% coupon. Two years have passed. Interest rates on similar b..
Many states have language in their constitutions that requires the state to provide for an “adequate” level of K-12 education spending. What is the economic rationale for such a requirement?
ATP Industries paid a $0.50 dividend to its common shareholders 6 years ago. It just paid a dividend of $0.67 to its common shareholders. If dividends continue to grow at this rate for the foreseeable future, and the shares are worth $10.05, what is ..
The equivalent annual cost method is useful in determining: A. the annual operating cost of a machine if the annual maintenance is performed versus when the maintenance is not performed as recommended. B. the tax shield benefits of depreciation given..
A stock has had returns of 11 percent, -8 percent, 6 percent, 21 percent, 24 percent, and 16 percent over the last six years. What is the arithmetic return? What is the geometric return for this stock? What is the standard deviation? (use the arithme..
Assume you are in the 39.6 percent tax bracket and purchase a 3.35 percent, tax-exempt municipal bond. Use the formula presented in this chapter to calculate the taxable equivalent yield for this investment.
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