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You plan to save for your retirement by depositing 15 payments of $10,000 into an account every other year. The first payment is made one year from today and the remaining 14 payments come every other year (i.e. 1st payment is at year 1, 2nd payment at year 3, 3rd payment at year 5,….,15th payment at year 29).You assume investments in this account will earn a nominal rate of return of 10%, compounded annually.
a. What is the 2-year effective interest rate?
b. What is the future value of your deposits at year 29?
c. If you plan to make 10 annual withdrawals from your retirement account starting one year after your last deposit, how much will your annual withdrawal be?( using the same rate of return of 10%)
The Cookie Shoppe expects sales of $500,000 next year at a 6% pretax profit margin and an average tax rate of 33%. If it chooses to pay out 30% of its earnings as dividends, what is the projected increase in retained earnings? (Show calculation)
A broker offers to sell you shares in Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 5 percent per year. The stock’s required return is 12 percent. What is the current value of ..
ECB borrows $2000000 USDs by issuing 4-year bonds. ECB's cost of debt is 6%, so it will need to pay $120000 USDs in interest each year for the next 4 years, and then repay the principal $2000000 USD in year 4. ECB's marginal tax rate will remain 35 t..
If investors expect a return of 12% on a stock that is expected to have a dividend yield of 4% next year, what is the expected growth rate on this stock?
Mary has earnings of $50,000 this year from her job. In addition, the market value of the condominium she owns increased from $100,000 to $105,000. She has no other capital gains or earnings, and receives no transfers. If Mary was subject to a compre..
(Bond valuation) Pybus Inc. is considering issuing bonds that will mature in 23 years with an annual coupon rate of 9%. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get an AA rating on its bonds and, ..
Which of the following is not true regarding mortgage backed securities? securitization provides liquidy to the mortgage markets and makes it possible for banks to loan more money to home buyers .
Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that supp..
In predicting the expected future return of the market, one of the dangers is that: A. the past is not indicative of the future. B. the past period measured is too short to get a reasonable estimate of the future. C. the equity premium does not inclu..
Is the expected outcome (value) of a die throw a random variable? - Could it be that the expected value of a bet is a random variable?
How should this sunset provision affect the savings and charitable giving rates of the elderly prior to 2011 and subsequent to 2011?
How does a leveraged lease differ from a nonleveraged financial lease? What type of firm or organization is most likely to take advantage of the leveraged lease financing option?
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