1.You want yo buy a new sports coupe for $84,600 and the finanace offer at the d

Question

1.You want yo buy a new sports coupe for $84,600 and the finanace offer at the dealership has quoted you 7.1 percent APR loan for 48 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?

2.River Rock Inc. just paid an annual dividend of $2.80. the company has increase its dividend by 2.5 percent a year for the past ten years and expects to continue doing so.What will a share of this stock be worth six years from now if the required return is 16%?

3.Eastern Shore Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $10,000 per year forever.If the required return on this investment is 5.5 percent how much will you pay for the policy?

4.Suppose that in 2010, a $10 silver certificate from 1898 sold for $11,200. For this to have been true, what would the annual increase in value on the certificate have been?

5.The furniture showroom offers credit to its customers at a rate of 1.4 percent per month. What is the effective annual rate of this credit offer?

6.The Green House has a profit margin of 5.6 percent on sales of $311,200. The firm currently has 15,000 shares of stock at a market price of $11.60 per share. what is the price-earnings ratio?

7. Keyser Materials has 8 percent coupon bonds on the market with 19 years to maturity. The bonds makre semiannual payments and currently sell for 102 percent of par. What is the current yield on Keysey Materials bonds? The YTM? the effective annual yield?

8.Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $82,600 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital?

Explanation / Answer

1. 84600= XPVIFA(.592%,48)

X= monthly payment= 84600/41.68= $2030

effective rate of interest= (1+7.1/1200)^12]-1= 7.3357%

2. P1= 2.80x1.025/(.16-.025)= $21.26

Price after six years from now = 21.26x1.16^6= $51.80

3. Amount= 10000/.055= $181818.18

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