Business finance Study Questions Assignment
1. How much will monthly deposits of $250, invested at 12% grow to in 8 years?
2. Tom projects he will need $480,000 in 7 years for college tuition for his child. What amount should Tom invest in a vehicle that pays 6%, to achieve that amount?
3. Your new employer offers you the following compensation schemes. Which will you choose? A) $6300/month for two years, or, B) $5300/month with a $25,000 signing bonus. 6% rate
4. Ralph Corp. is issuing Bonds with 6% coupon rate, 20 year maturity, semiannual interest payments. If the market rate of interest for such bonds is currently, 8%, how much should you pay for a bond?
5. Rita bonds with 8 years to maturity are currently selling at 99.5. The bonds are $1,000 par value, 8% coupon rate, $5,000,000 total face value. The bonds can be called at 101.5. The Bonds are convertible to Common Stock for $250 for 5 shares of Common. What must Rita pay to call the bonds?
6. You purchase bonds on March 1. Interest on the bonds is payable on May 1 and November 1. The bonds are $1000 face value, 7% coupon rate, with YTM of 8.3%. How much accrued interest must you pay when buying one of these bonds?
7. A stock currently has a dividend of $5, with a growth rate of 4%, and a R – discount rate of 6%. What is the value of the stock using the Dividend Growth model?
8. I plan to buy 100,000 shares of Widget stock today and sell it to cover my travel expenses in 5 years. The current interest rate is 8% and it is expected to remain 8% for 9 years. What is the expected price of this stock in 5 years? Current dividend is $5.00, growth rate is 8% and the R, real rate is 13%
9. Explain the difference between the two types of annuities.
10. Explain the significance when you borrow money of the compounding periods. As a borrower do you want more of fewer compounding periods?