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Future value of an annuity Your client is 20 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $8,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average return of 10% in the future.
If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent.
How much will she have at 70? Round your answer to the nearest cent.
She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Round your answers to the nearest cent.
Annual withdrawals if she retires at 65 $?
Annual withdrawals if she retires at 70 $?
A stock is going to pay a dividend of $1 per share in 3 months. The current stock price is $40, and the interest rate is 5% per year with continuous compounding. What should be the price of a 5-month forward contract on the stock?
On Sept. 9, 2015, the Justice Department announced it will “will try harder to hold company executives responsible for corporate crimes.” The Justice Department had followed a policy of prosecuting companies - instead of individuals within a company...
Sara owns 160 acres of farmland worth $800,000. She inherited the land from her father 30 years ago when it was worth $200,000. Her married son would like to buy the land, but has limited funds. He proposes buying the land on a contract for deed, pay..
You have $136,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 12 percent and that has only 74 percent of the risk of..
You’ve collected the following information about Odyssey, Inc.: Sales $ 165,000 Net income $ 12,600 Dividends $ 8,300 Total debt $ 66,000 Total equity $ 55,000 What is the sustainable growth rate for the company? Sustainable growth rate % If it does ..
Hawkeye mining corp. is close to exhausting its current mining resources. Consequently, the firm’s earnings and dividends are expected to decline at a constate rate of 6% per year. The most recent dividend $4.10 and the required return on the stock i..
Assume that Reginald Worthington, who pays 40 percent in income taxes, plans to contribute $100,000 to not-for-profit Ravenswood Community Hospital. Without the contribution, his tax bill would be $500,000. What would be his tax bill if he makes the ..
You have a portfolio equally invested in Butterfly Hubcaps, Addi Corp and Brian’s Auto. The expected returns are 5%, 12%, and 17.5%. What is the expected return of the portfolio?
Last year, you earned 11.67 percent on your investments. During that time period, inflation averaged 6.4 percent. What was your real rate of return based on the Fisher formula?
Great Seneca Inc. sells $100 million worth of 29-year to maturity 10.59% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $980 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital ..
The following table shows betas for several companies. Calculate each stock’s expected rate of return using the CAPM. Assume the risk-free rate of interest is 7%. Use a 8% risk premium for the market portfolio.
The number one semiconductor company in the world, Applied Materials, recently merged with the world's number three semiconductor company, Tokyo Electron. The stock prices of both companies went up significantly after the merger was announced, which ..
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