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What is the size of annual pension

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Reference no: EM132825900

PROBLEM 1

Chomp Champ Inc. is experiencing rapid growth. Dividends are expected to grow at 30% for the next 3 years, 20% over the following year, and then 6% per year indefinitely. The required rate of return on this stock is 18% and the stock currently sells for $42.50 per share. What is the projected dividend for the coming year?

PROBLEM 2

Bond MGCR is a $1,000 par, 4-year, 7.5 % semi-annual coupon bond. Assume a required return of 6%.

(a) Calculate the current price of the bond

(b) Calculate the current yield of the bond

PROBLEM 3

To insure you, Assurances Nochance Ltd offers the following plan: you will pay 20 annual payments of $8,000 starting one year from today. Then, in year 21, you or your heirs will receive a pension for the following 15 years. The discount rate used by the company to calculate your pension is 6%.

(a) What is the size of your annual pension?

(b) If you could take a one-time lump sum payment 25 years from today instead of the pension, how high would the equivalent lump sum payment have to be?

Reference no: EM132825900

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