# Question 3 bob katz is purchasing a new honda pilot

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\$12,088
Question 3 Bob Katz is purchasing a new Honda Pilot for \$32,000. He is financing \$28,000 with a six year, 4% loan with annual payments. Construct an amortization schedule, in the 2nd year row, corresponding to his second annual payment, what is the dollar amount of the principal reduction?
Question 4 Sally Mander is planning on retiring in 20 years and she believes that she will live for 25 years after she retires. Sally would like to set up a retirement plan that will pay her \$90,000 annually for 25 years. Assuming 9% interest over the next 20 years that she is working, and 6% interest after she retires, how much will Sally need to save annually over the next 20 years?
Question 5 Regarding compound interest, daily compounding of your savings account will always be worth more compared to annual compounding.
QUIZ-Bond and Stock Valuation Question 1 Builtrite bonds have the following: 4 1/4% coupon, 14 years until maturity, \$1000 par and are currently selling at \$1032. If you purchase this bond, what would be your AYTM?
Question 2 Builtrite bonds have the following: 6 ½% coupon, 12 years until maturity, \$1000 par and are currently selling at \$1064. If you want to make an 6% return, what would you be willing to pay for the bond?
Question 3 Builtrite sold 10 year, \$1000 par value, zero coupon bonds yielding 4%. What did they sell for?
Question 4 Builtrite preferred stock has a 5 1/2% coupon based on a par value of \$50 a share. Currently, investors require a 5% return. What is the value of Builtrite’s preferred stock?
Question 5 Given the following information, calculate the current value of the stock: current dividend is \$1.50, projected super normal growth for three years at 20%, growth rate after year 3 should remain constant at 10% and you want to earn a 16% annual return. What should you pay for the stock?
QUIZ-Risk and Return Question 1 Questions 1-2 go with the following information: Terry Dactel is considering the purchase of an asset having the following cash flows: What is the asset’s expected return:
Question 2 What is the asset’s standard deviation?
Question 3 Polly Khan is trying to calculate the risk-free rate given the following information: The current market rate of interest is 8%. Investor’s have been requiring a 10% annual return on Builtrite’s stock which has a beta of 1.5. What is the current risk- free rate?
Question 4 Builtrite has calculated the average cash flow to be \$12,000 with a standard deviation of \$4,500. What is the probability of a cash flow being greater than \$9750? (Assume a normal distribution.)
Question 5 The purpose of the CAPM is to try and equate a stock's required return to its perceived level of risk.
QUIZ-Cost of Capital Question 1 Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of \$8 and are currently selling for \$86 a share. What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% marginal tax bracket?
Question 2 Builtrite Furniture is considering sells bonds for a plant expansion. Currently, Builtrite believes that it could sell 15 year maturity, \$1000 par value, 5 3/4% coupon bonds after flotation costs for \$985.