Question

12) 12) AB Co. stock pays a constant anual dividend sells for $56.07 a share, and has a market rate of return of 12.2 percent. What is the amount of the next annual dividend? A) $6.21 B) 56.84 C) 55.67 D) $5.94 E) $7.30 13) 15) Dexter Mills issued 20-year bonds one year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM is 8.2 percent, what is the current bond price? A) $1,098.00 B) $1,190.93 C) $985.55 D) $991.90 E) $1,142.16 14) 14) According to the Rule of 72, you can do which one of the following? A) Triple your money in 7.2 years at 7.2 percent interest B) Approximately double your money in 11 years at 6.55 percent interest C) Double your money in 7.2 years at 8 percent interest D) Approximately triple your money in 7.2 years at 10 percent interest E) Approximately double your money in five years at 7.24 percent interest 15) 15) John's Auto Repair just obtained an interest-only loan of $35,000 with annual payments for 10 years and an interest rate of 8 percent. What is the amount of the loan payment in Year 8? A) $4,280.00 B) $4,918.07 C) $5,216.03 D) $2,800.00 E) $5,211.06 16) - 16) Four years ago, Saul invested $500. Three years ago, Trek invested $600. Today, these two investments are each worth $800. Assume each account continues to earn its respective rate of return. Which one of the following statements is correct concerning these investments? A) One year ago, Saul's investment was worth less than Trek's investment. B) Three years from today, Trek's investment will be worth more than Saul's. C) Trek earns a higher rate of return than Saul. D) Trek has earned an average annual interest rate of 9.86 percent. E) Saul has earned an average annual interest rate of 12.64 percent.

Answer 1

© Ans 16 Saul's rate of return - ? FV = Soo PV = -500 n = 4 year Putting these values in calculator 8- 12.46% (not 12.64% so option E is wrong) Trek's rate of return = ? FV=800 PV = - 500 n = 3 year Putting these values r = 10.06% (not 986 son option is wrong). (A) is correct. Last for One year ago Saul's investment was 0500X1-12463 - 711.15 and Trek's investment was 500 X 1.10062: 726.73 (B ) is wrong since Saul's date of reton hare so he will learn more in tuture

72 - R year where of R is rate interest By options. since 72 6.55 (B) is correct, = 10 , 99 years. a 11 years. An 15 Griven PV = $35000 n 10 year R = 810 PMT = ? Fro (Since there will be no amt, due at the 10th year) we have to find loan payment in year 8. Actually the loan paynet in every year will be same! In excel put the formula - PMT C10, 8, 3500oo, o -$5216.03 Am 16. Saul's - - يو

Coupon Rate(PMT) - 10.2 5.1% Because it is paid twice a year so divide the rate by 20 YTM - 8.24.1. EV = 1000 PV = ? 2 Put these values in excel formula by using = PV (Pate, npes, pont, (fu], - Pv4.1, 40, 51, 1000, og = $1195.01 Closest answer is 1190.03. So the correct answer is (B). you will get the answer in negative which shows that you have to give this much money. Ans14. According to 72 rule amount of money doubles

= Ans 12 share of AB Co. = $56.07. Market rate of return = 12.2% us support that whatever is the rate of return that u converted to dividend so the annual dividend for is = 12.2 next year Too X 56.07 = $6.84 Correct of option is B. Ans 13. Given Time (N) = 20 Coupon Rate (PMT) = 10.2% Par Value (F) = $1000 YTM (S/Y) = 8.2% Whatever I am writing in bracket is the expression used in Financial calculator and excel. Simce & Payments are semi-annual, we have to adjust the value. N=20x2 = 40 years. Since there will be 40 periods in which coupon will be paid.