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Handout Three - perpetuity Supposing an interest rate of 10...

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Agenda Go over practice midterm Current events Chapter 4 Questions Questions and Answers
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Current Events What is the formula for gdp? What is the current stock market price? What was it at its lowest in 2008? What is a hostile takeover? Unemployment. GDP. Dow Jones. Bull/Bear Markets. 3 C'S, 4 P's.
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Current Events What is the formula for gdp? C+I+G+(X-M) What is the current stock market price? What was it at its lowest in 2008? ~10000, ~6600 What is a hostile takeover? Seizure of a firm without approval/informing of management
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Problems for Practice I buy a stock that will pay $50 a year in
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Unformatted text preview: perpetuity. Supposing an interest rate of 10%, what is the PV of the stock? What about with a growth rate of 5%? We have a project where we initially make a payment of 5000 dollars. The project promises to yield 1050 a year for 5 years. At a 8% interest rate, is this investment worth it? At 1% interest per month, what is effective annual rate? Additional Problems • Suppose you have 1000 in a bank account. Annual interest rate is 5%. What would it be worth in 2 years if compounding was annually? Quarterly? Monthly?...
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