Midterm

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1. | Question : | You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now? | | | Student Answer: | | $18,369 | | | | $19,287 | | | | $20,251 | | | | $21,264 | | | | $22,327 | | | | Points Received: | 10 of 10 | | Comments: | | | | Question 2. | Question : | Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $50,000 per year for 30 years, beginning a year…show more content…
The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price? | | | Student Answer: | | $28.90 | | | | $29.62 | | | | $30.36 | | | | $31.12 | | | | $31.90 | | | | Points Received: | 10 of 10 | | Comments: | | | | Question 10. | Question : | Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1? | | | Student Answer: | | $2.20 | | | | $2.44 | | | | $2.69 | | | | $2.96 | | | | $3.25 | | | | Points Received: | 10 of 10 | | Comments: | | | | Question 11. | Question : | O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $850. What is the bond's nominal (annual) coupon interest rate? | | | Student Answer: | | Using Excel: =PMT(9.25%/2,25*2,-850,1000) Result =38.50*2 = 77.01/$1000 = 7.7% Bond nominal coupon interest rate = 7.7% | | | | Points Received: | 0 of 20 | |

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