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(a) You plan to save $500 at the end of each month for the next 2 years. With the expectation of a pay raise, you want to save $850 at the end of each month for 1 year after that. Assuming an interest rate of 1.5% per annum throughout the period of calculation, calculate the value of your savings at the end of 3 years.
(b) It has now been 5 years since you graduated and you plan to take time off to travel. For the next 18 months while you travel, you want to receive $1,000 at the end of each month. Using an applicable interest rate of 2% per annum, how much should you invest in the annuity today?
Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $5 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require ..
You find a certain stock that had returns of 14.4 percent, –22.2 percent, 28.2 percent, and 19.2 percent for four of the last five years. Assume the average return of the stock over this period was 12.4 percent. What was the stock’s return for the mi..
If a limited-pay whole life insurance policy is determined to be a “MEC” (Modified Endowment Contract): Select one: a. cash value increases cease immediately b. distributions, including policy loans, will likely be includable in income c. death benef..
Suppose that General Motors Acceptance Corporation issued a bond with 10 years until? maturity, a face value of $1,000?, and a coupon rate of 7.9% ?(annual payments). Assuming the yield to maturity remains? constant, what is the price of the bond imm..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $4.25 per share dividend 10 years from toda..
Describe how the Internal Rate of Return is calculated and describe the information this measure provides about a sequence of cash flows. What is the IRR criterion decision rule? What is the relationship between IRR and NPV and are there any situatio..
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.75 percent semiannual coupon bonds are selling at a price of $814.61. If these bonds are the only debt outstanding for the firm. What is the curren..
Blue water designs is preparing a bond offering with a 7% coupon rate and a face value of $1000. The bonds will be repaid in 5 years. The company plans to issue the bonds at par value me pay interest semi annually. Given a discount rate of 6%, what s..
A corporate treasurer is looking to invest about $4 million for 60 days. Commercial paper rates are a 3.65% discount and CD rates are 3.66%. Comparing the bond equivalent yields over a 365-day year, which is the best alternative? What is the opportun..
Demand and Supply Shocks Which of the following can be inflationary?
Operating Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $25 million Operating costs (not including depreciation) 8 millio..
Marichal Motors is considering an investment in a proposed project. Rather than making the investment today, the company wants to wait a year to collect additional information about the project. What is the expected NPV (in today's dollars) if the co..
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