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Finance 313 Chapter 6 Practice Quiz

# Finance 313 Chapter 6 Practice Quiz - Chapter 6 Discounted...

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Chapter 6 Discounted Cash Flow Valuation Chapter 06 Quiz Remember: For nonannual compounding, make these changes: multiply the “N”, divide the “I”, and divide the “PMT” (If it’s an annuity) ________ 1. You are able to pay mortgage payments of \$675 a month for thirty years. The interest rate is 9.5 percent, compounded monthly. What price house can you afford to buy if you have \$5,000 cash available as a down payment? a. \$72,712.50 b. \$75,275.51 c. \$80,275.51 d. \$85,275.51 ________ 2. You are going to receive \$6,000 at the end of each quarter for the next five years. What is the net present value of these payments at a discount rate of 7 percent, compounded quarterly? ________ 3. You want to retire on the day you have \$1,000,000 in your savings account. You expect to earn 4 percent, compounded monthly, on your money during your retirement. Your plan is to withdraw \$4,500 a month as retirement income from this account. How many years can you be retired until you run out of money? ________ 4. A preferred stock pays annual dividends of \$1.75. How much are you willing to pay today to buy one share of this stock if you want to earn a 12.5 percent rate of return? ________

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Finance 313 Chapter 6 Practice Quiz - Chapter 6 Discounted...

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