Unformatted text preview: 10-percent. 4. The expected dividend next year is $1.30 and dividends are expected to grow at 5% forever. If the discount rate is 10%, what is the value of this promised dividend stream? 5. If you can afford a $400 monthly car payment, how much car can you afford if interest rates are 7% on 36-month loans? 6. A defined-benefit retirement plan offers to pay $20,000 per year for 40 years and increase the annual payment by 3-percent each year. What is the present value at retirement if the discount rate is 10-percent? 7. You are purchasing a home and applying for a $500,000 mortgage. The bank quotes you a rate of 7% APR for a 30-year fixed rate loan. What is your monthly payment? • Note: when no compounding interval is stated, it is generally equal to the payment interval – in this case monthly....
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This note was uploaded on 11/22/2010 for the course FINANCE 300 taught by Professor Xiao during the Spring '10 term at UChicago.
- Spring '10