Value of money important in financial planning-forecasting

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1. If a stock pays a constant annual dividend then the stock can be valued using the:

a) perpetuity present value formula.

b) present value of an ordinary annuity formula.

c) payout ratio formula.

d) fixed coupon bond present value formula.

e) present value of an annuity due formula.

2. Why is the time value of money important in financial planning and forecasting with respect to personal finances.

3. Given a bond price of par (with a face amount of $1,000), Semi-annual interest payments of $50, and McCauley's duration of 8.5 years. If the market interest rate changes from 10% to 10.2%, how much will the bond's price change?

Reference no: EM131889384

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