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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...

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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 yea
A 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 is
Problem 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 XXXXXXXXXXAt the end of year 12 you intent to sell the building for $200000
Create 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 monthly payments?
Problem 5
Find the the value of a prefe
ed 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 $ XXXXXXXXXXThe face value of the bond is $1,000. Assume semiannual coupon payments.
Problem 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.
Answered Same DayFeb 27, 2022

Solution

Prateek answered on Feb 28 2022
54 Votes
Problem 1
            Contribution    $5,000
            Number of Years of Investment    20
            Investment Type    Annual Return    Investment Value at the End
            Money Market Fund    2.50%    $8,193.08
            Long Term Bond Fund    6%    $16,035.68
            Conservative Common Stock Fund    8%    $23,304.79
            Aggressive Common Stock Fund    14%    $68,717.45
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 yea
A 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
            Dividend    2
            Required Rate    9%
            Growth Rate    3%
            Stock Price    34.33
            Contribution    $5,000
            Number of Years of Investment    20
            Investment Type    Annual Return    Investment Value at the End
            Money Market Fund    2.50%    $8,193.08
            Long Term Bond Fund    6%    $16,035.68
            Conservative Common Stock Fund    8%    $23,304.79
            Aggressive Common Stock Fund    14%    $68,717.45
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
Problem 3
        Required Rate    11%
        Month    Rent    PVIF    PV of...
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