What is the largest equal annual withdrawal

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Reference no: EM132030428

1. Marie Snell recently inherited some bonds (face value $100,000), and soon thereafter became engaged. Sam wants Marie to cash in the bonds so they can "live like royalty" for two years in Monte Carlo. The 2% annual coupon bonds (interest payable on December 31) mature on December 31, 2025, and it is now January 1, 2006. Bonds with similar risk and maturity yield 12%. If Marie sells the bonds and the proceeds earn 10% compounded annually in an account, what is the largest equal annual withdrawal she could make for two years, beginning today?

$13,255

$29,708

$12,654

$25,305

$14,580

2. A stock has an expected return of 9%, and its beta is 0.8. The market average return is 10% and the risk-free rate is 2%. What is the alpha of the stock?

Reference no: EM132030428

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