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##### FIN571 FIN/571 WEEK 4 QUIZ WILEYPLUS

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solution

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Question;1. Present value: Tommie Harris is;considering an investment that pays 6.5 percent annually. How much must he;invest today such that he will have $25,000 in seven years? (Round to the;nearest dollar.);$26,625;$16,088;$23,474;$38,850;2. PV of multiple cash flows: Jack;Stuart has loaned money to his brother at an interest rate of 5.75 percent. He;expects to receive $625, $650, $700, and $800 at the end of the next four years;as complete repayment of the loan with interest. How much did he loan out to;his brother? (Round to the nearest dollar.);$2,250;$2,404;$2,713;$2,545;3. PV of multiple cash flows: Hassan Ali;has made an investment that will pay him $11,455, $16,376, and $19,812 at the;end of the next three years. His investment was to fetch him a return of 14;percent. What is the present value of these cash flows? (Round to the nearest;dollar.);$41,675;$39,208;$33,124;$36,022;4. PV of multiple cash flows: Pam Gregg;is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an;inheritance over the next four years. If she can earn 11 percent on any;investment that she makes, what is the present value of her inheritance? (Round;to the nearest dollar.);$309,432;$412,372;$434,599;$361,998;5. Present value of an annuity: Transit;Insurance Company has made an investment in another company that will guarantee;it a cash flow of $37,250 each year for the next five years. If the company;uses a discount rate of 15 percent on its investments, what is the present;value of this investment? (Round to the nearest dollar.);$124,868;$101,766;$251,154;$186,250;6. Future value of an annuity: Carlos;Menendez is planning to invest $3,500 every year for the next six years in an;investment paying 12 percent annually. What will be the amount he will have at;the end of the six years? (Round to the nearest dollar.);$28,403;$24,670;$21,000;$26,124;7. Bond price: Briar Corp is issuing a;10-year bond with a coupon rate of 7 percent. The interest rate for similar;bonds is currently 9 percent. Assuming annual payments, what is the present;value of the bond? (Round to the nearest dollar.);$872;$1,066;$990;$945;8. PV of dividends: Cortez, Inc., is;expecting to pay out a dividend of $2.50 next year. After that it expects its;dividend to grow at 7 percent for the next four years. What is the present;value of dividends over the next five-year period if the required rate of;return is 10 percent?;$10.76;$11.50;$11.88;$9.80;9. PV of dividends: Givens, Inc., is a;fast growing technology company that paid a $1.25 dividend last week. The;company's expected growth rates over the next four years are as follows: 25;percent, 30 percent, 35 percent, and 30 percent. The company then expects to;settle down to a constant-growth rate of 8 percent annually. If the required;rate of return is 12 percent, what is the present value of the dividends over;the fast growth phase?;$7.25;$8.37;$6.46;$1.25

Paper#47446 | Written in 18-Jul-2015

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