What return is this investment offering

Assignment Help Financial Management
Reference no: EM131444257

1. A financial planning service offers a college savings program. The plan calls for you to make eight annual payments of $5,000 each, with the first payment occurring today, your child's 10th birthday. Beginning on your child's 18th birthday, the plan will provide $18,000 per year for four years. What return is this investment offering?

a) 9.96%

b) 12.11%

c) 14.38%

d) 16.69%

e) 18.12%

2. You are going to withdraw $1,000 at the end of each year for the next three years from an account that pays interest at a rate of 8% compounded annually. How much must there be in the account today in order for the account to reduce to a balance of zero after the last withdrawal?

a) $ 793.83

b) $2,577.10

c) $2,602.29

d) $2,713.75

e) $2,775.67

Reference no: EM131444257

Questions Cloud

How much interest they would pay in the eleventh year : William Chris opened a steak house a few years ago with his sister, Ruth. In going through their financial records they found an old amortization schedule that their lender had prepared when they took out a loan to start the business. Not being too f..
What is the equity multiplier : Isolation Company has a debt–equity ratio of 0.4. Return on assets is 8 percent, and total equity is $453875. What is the equity multiplier?
Second year will represent repayment of principal : Your company is planning to borrow $1,000,000 on a 5-year, 15%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal?
What is your effective annual interest rate : You are offered an investment with a quoted annual interest rate of 15% with monthly compounding of interest. What is your effective annual interest rate? Bank A pays 8 percent interest, compounded quarterly, on its money market account. The managers..
What return is this investment offering : A financial planning service offers a college savings program. The plan calls for you to make eight annual payments of $5,000 each, with the first payment occurring today, your child's 10th birthday. Beginning on your child's 18th birthday, the plan ..
Calculate the term structure interest rates for maturities : Calculate the term structure interest rates for maturities of 1 to 5 years, for all 3 securities. Draw the yield curves for the 3 term securities of length 1 to 5 years. Which security, if you must choose 1, will you buy if you plan to have it mature..
Evaluating the proposed acquisition of new milling machine : The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine’s base price is $108,000 and it would cost another $12,500 to modify for special use. Campbell’s tax rate is 35%. Should this machine be purchased? Assu..
About the discount factors used to value the cash flows : Suppose you are trying to find the present value of two different cash flows using the same interest rate for each cash flow. One is $2,000 twenty years from now, the other a $1,600 flow fourteen years from now. Which of the following is true about t..
What was the annual percentage rate of the consumer loan : Mrs. Berry purchased $4,000 worth of furniture from a furniture store. The purchase was financed by a consumer loan which required Mrs. Berry to pay a monthly payment of $150 at the end of each month for three years. What was the annual percentage ra..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Hearing more about the potential for a recession

As the presidential election looms, we are hearing more about the potential for a recession in the coming 12-months. What signs should we be looking for to determine if it is indeed on its way? What are the implications on "your company" and how woul..

  What is the log return of your position

Suppose that you bought Mike Inc. three years ago at $20.50 per share and you can now sell it for 21.74 per share now. Also, Mike Inc. has paid an annual dividend of $0.50, $0.47, and $0.63 in years one, two, and three. Ignoring the issue of Time Val..

  What was the decision that the firm made about the projects

What was the decision that the firm made about the different projects and what was the decision process that they used to come up with their final decision?

  What is the market price per share of stock

Say you decide to start a firm and you need $500 million of capital to begin. You sell stock for its par value, a total of one million shares (par value is $200 per share), and sell $300 million of bonds at par value. Assume that the market expects t..

  Interest rate sensitivity of single cash flow increases

Just as the interest rate sensitivity of a single cash flow increases with its maturity, the interest rate sensitivity of a stream of cash flows increases with its duration. A firm's market capitalization is determined by the difference in the market..

  Compensating balances

Compensating balances have the following advantages EXCEPT:

  Risk-free rate-what is the cost of equity

The risk-free rate on 30 year U.S. Treasury bonds is 2.75% and the expected rate of return on the overall stock market is 7%. The BOW company has a beta of 1.4. What is the cost of equity?

  The expected growth rate on dividends

Shylock Corporation JUST PAID a dividend of $9.52. The expected growth rate on dividends is 5 percent. What is the current price of this stock if the required rate of return is 15 percent?

  What was your total real return on investment

You bought one of Great White Shark Repellant Co.’s 6 percent coupon bonds one year ago for $1,040. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 5..

  Calculate the price of each call using black scholes

You are interested in purchasing a call option on a common stock that is currently trading at a price of 100 per share. you are given the following information: the standard deviation is .4, the time to maturity is 3 months, and ln (current share pri..

  What factors affect the cost of money

What factors affect the cost of money? Use at least one outside source. You may form your own opinions as well but support them with research. Production Opportunities- the returns available within an economy from investment in productive (cash produ..

  Weighted-average process costing to account for production

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. Instead of being 30% complete with respect to ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd