BUSM410 HW 01_Returns

# BUSM410 HW 01_Returns - Eric Schneck BM 410 HW#1 Free...

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Eric Schneck BM 410 HW #1 Free Response 1. Assume you want to put away some money in an account and you want the value in the account to be \$10,000 in four years. If the account pays 3% interest each year, how much money do you need to put away now? PV* (1+.03)^4 = 10000 pv=\$8,885 2. An account pays 0.5% per month. What is its effective annual return? 1.005^12 = 1.0617 - = 6.17% 3. An account pays 15% every 3 years. What is the effective annual return? 1+.15 = (1+Ra)^3 Ra = 4.77% 4. An account pays 5% every 6 months. What is the effective annual return? (1+.05)^2 = (1+Ra) RA=10.25% 5. An account pays 5% every 6 months. What is the effective monthly return? 1.05 = 1+Ra^6 1.05^1/6 = .82% 6. Describe the two most important characteristics of common stock as an investment as discussed in the text. Residual Claim – shareholders are the last in line to claim profits from the liquidation of a business Limited Liability Features – The most shareholders can lose is their original investment, they themselves are not personally liable. Refer to the syllabus and indicate whether the following statements are true or false.

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## This note was uploaded on 03/17/2011 for the course BUS M 410 taught by Professor Brianboyer during the Fall '10 term at BYU.

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BUSM410 HW 01_Returns - Eric Schneck BM 410 HW#1 Free...

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