Problem 1<\/p>\n
You start a new job. They give you a variety of investments for your 401K plan. You have 4 choices<\/p>\n
A money market fund that historically has returned 2.5% per year<\/p>\n
A long term bond fund with an average annual return of 6%<\/p>\n
A conservative common stock fund that has earned 8% per year.<\/p>\n
An aggressive common stock fund that has earned 14% per year.<\/p>\n
If you want to contribute $5000 per year for the next 20 years, how much will you have with each of the options?<\/p>\n
Problem 2<\/p>\n
If a company just paid a dividend of $2.00 per share, the required rate of return is 9% and the growth rate is 3% then the value of the stock is<\/p>\n
Problem 3.<\/p>\n
You decide to buy a small office building with 1 tenant. The tenant has a lease that calls for monthly rent payments of $2,500 per month for the next 6 years. After that, the lease expires. You expect to be able to increase the rent 4% per year for years 7-12. At the end of year 12 you intent to sell the building for $200000<\/p>\n
Create a table showing the projected cash flows for the investment, assuming the next rental payment occurs one month from today.<\/p>\n
Assuming you need to earn 11% on this investment, what is the maximum price you would be willing to pay for the building today? (ignore taxes and amortization for this analysis)<\/p>\n
Problem 4.<\/p>\n
You want to buy a house with a $30,000 down payment. The loan amount is $297,000. The annual interest rate is 3 \u00be % and the loan is for 360 months. What are your payments?<\/p>\n
Problem 5.<\/p>\n
Find the the value of a preferred stock with a 6% coupon and $100 par value with a required rate of return of 10%.<\/p>\n
Problem 6.<\/p>\n
Calculate the yield to maturity of a 10% coupon bond with 5 years to maturity if the bond sells for $927.91. The face value of the bond is $1,000. Assume semiannual coupon payments.<\/p>\n
7.<\/p>\n
If a new company is expected to growth exponentially and pay dividends of $1, $2, and $3, for the first 3 years, respectively. After that time the growth is expected to be at 5% thereafter. The required rate of return is 10%. You can use the PV and the Gordon Growth model to estimate the value of the stock.<\/p>\n","protected":false},"excerpt":{"rendered":"
Problem 1 You start a new job. They give you a variety of investments for your 401K plan. You have 4 choices A money market fund that historically has returned 2.5% per year A long term bond fund with an Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-49993","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/49993","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=49993"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/49993\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=49993"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=49993"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=49993"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}