Home » 7 Problems | Rated A+

7 Problems | Rated A+

Problem 1You start a new job. They give you a variety of investments for your 401K plan. You have 4 choicesA money market fund that historically has returned 2.5% per yearA long term bond fund with an average annual return of 6%A conservative common stock fund that has earned 8% per year.An aggressive common stock fund that has earned 14% per year.If you want to contribute $5000 per year for the next 20 years, how much will you have with each of the options?Problem 2 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 isProblem 3.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 $200000Create a table showing the projected cash flows for the investment, assuming the next rental payment occurs one month from today.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)Problem 4.You want to buy a house with a $30,000 down payment. The loan amount is $297,000. The annual interest rate is 3 ¾ % and the loan is for 360 months. What are your payments?Problem 5.Find the the value of a preferred stock with a 6% coupon and $100 par value with a required rate of return of 10%.Problem 6.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.7.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.

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