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1.    A stock sells for \$2000, pays \$30 in dividends and grows at 2% annually. a.    What is the

interest rate?

b.    If the Risk-free rate is 2%, what is the risk premium?

2.    Compute the price of share of stock that pays a dividend of \$2 per year, assuming that you will sell it for \$30 after two years and you require 12% return.

3.    A stock paid \$4 dividends last year, the dividends grow by 10% annually. What would you be willing to pay for it today, assuming that you will hold it forever and you require 15% return?

4.    If a stock pays \$20 in dividends the grows at 2.5% annually and the interest rate s 4.5%, what would you be willing to pay for the stock? Is that your maximum or minimum?

5.    You expect a stock to sell for \$100 after two years and pay \$20 in dividends each year. What would you pay for it today if the interest rate is 4%?

6.    Compute the price of share of stock that pays a dividend of \$2 per year, assuming that you will sell it for \$30 after two years and you require 12% return.

7.    A stock paid \$4 dividends last year, the dividends grow by 10% annually. What would you be willing to pay for it today? Assuming that you will hold it forever. Interest rate is 12.

8.    To how much would an investment of \$2000 grow in five years if the return was 12% annually?

9.    What is the present Value of a lump sum of \$3000 awarded after 5 years if the interest rate was 12% annually?

10. How long would it take for \$2000 to grow to 3000 if the return rate was 12% annually?

11. What return rate is required for \$2000 to grow to \$25000 in five years/

12. An investment of \$10000 returns \$3000 every year for the next five years. What is the internal rate of return?

13. What maximum price would you be willing to pay for a bond with a \$100 annual coupon that sells for \$800 after five years. The interest rate is 12%?

14. What does it mean to say the market is efficient? More than one meaning.

15. What are the bond risks? What are the stock risks?

16. Why is having a developed financial market beneficial to the economy?

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