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Mr. Funperson will graduate with an engineering BS degree from USF before his 25th birthday, and start his first professional job immediately upon his graduation. Mr. Funperson decides to set up a retirement account and makes his first monthly deposit into the retirement account a month after his 25th birthday. He will continue making these monthly deposits until he retires at the age of 65. Assume that his last monthly deposit will be made on his 65 birthday, and his goal is for his retirement account to reach half a million dollars on his 65 birthday. Further assume an interest rate of 6% per year.
(a) Calculate Mr. Funperson’s monthly deposit amount.
(b) Calculate Mr. Funperson’s monthly deposit if he delays by 10 years, That is, his first deposit will be made a month after his 35th birthday.
(c) Calculate Mr. Funperson’s monthly deposit if he stops making deposits after his 55th birthday. That is, his last deposit will be made on his 55th birthday.
ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.25. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock. a) At what..
A twenty year annuity pays 2400 + 300k on the first day of the k-th month of the year. Thus it pays 2700 on January, 3000 on February 1...6000 each December 1. The first payment is on a January 1. Find an expression for the value of this annuity just..
Given the following information calculate the expected rate of return for a portfolio with the following stocks: Target earning 6%,,Wal*Mart earning 10%, Delhaize earning 4%. What is the expected rate of return for the portfolio?
Breakeven Analysis Procrastinators Anonymous (PA) is hosting their annual convention this coming year in Dallas, TX. Although this is not typical of this organization, they wish to plan ahead to determine what the cost of the keynote banquet ticket s..
Estimate the historical standard deviation of google and compare the implied standard deviation with the historical standard deviation.
Concentric Corporation has 10 million shares of stock outstanding. Concentric's after tax profits are$140 million and the corporation's stock is selling at a price-earning multiple of 18, for a stock price of$252 per share. What is the effect on an i..
Give an example of a perpetuity. How does a perpetuity differ from an annuity? Explain how to determine the present value of an uneven cash flow stream.
Should a company pursue price hike or focus on increasing sales volume
Assume the pretax cost of debt is less than the cost of equity.
The City of Forecaston received the following in total revenue over the past five years. What is the average annual revenue increase in percent?
The real risk-free rate is 3.5%. Inflation is expected to be 1.75% this year and 4.75% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury secur..
Suppose 2-year Treasury bonds yield 5.9%, while 1-year bonds yield 6.8%. r* is 1.75%, and the maturity risk premium is zero. Using the expectations theory, what is the yield on a 1-year bond, one year from now? Calculate the yield using a geometric a..
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