An investment will pay $32,000 per year forever. If the relevant rate is 10% p.a

Question

An investment will pay $32,000 per year forever. If the relevant rate is 10% p.a. and

compounded monthly, the investment is worth $______ today. A. 305,597.01
B. 317,604.75
C. 320,000.00

D. 384,000.00 E. 3,840,000.00

Which of the following investment options is most valuable?
A. receiving $10,000 today
B. receiving $1,000 per year for 10 years with the first payment made today C. receiving $2,000 per year for five years beginning next year
D. receiving $5,000 today and $5,000 next year
E. Without an interest rate there is not enough information to tell.

Kerri James is considering the purchase of a car, which will cost her $24,600.
borrow the entire purchase price and make monthly payments over the next six years. The first payment is due next month and the interest rate is 3.00% p.a. She will owe $____ on the car immediately following the 16th payment.
A. 17,397.75
B. 18,858.19
C. 19,508.99
D. 20,757.33
E. 21,348.72

You just graduated and started a job. Wisely, you have started a retirement plan. You plan to make equal monthly deposits into an account, which earns 8.00% p.a. compounded monthly. The first deposit is made today. The final monthly deposit will be made exactly 30 years from today at which time you retire. After you retire you make monthly withdrawals of $10,000 per month for 30 years. The first withdrawal is made exactly one month after you retire. Exactly 10 years after your retire you plan to buy a jeep and a mountain cabin for a total of $350,000. To reach your goal you must deposit $_____ each month while you are employed.

A. 929.10 B. 935.91 C. 952.62 D. 1,012.80 E. 1,020.25

10. The primary goal of a publicly-owned firm interested in serving its stockholders should be to ____________.

A. maximize expected net income

B. maximizethefirmvalue

She will

C. maximizeexpectedtotalcorporateprofit

D. maximize expected EPS
E. minimize the chances of losses

Explanation / Answer

1)

EAR = (1+APR÷n)^n-1

n is number of compounding per year

= (1+10%÷12)^12-1

= 10.47%

Investment worth:

= $32,000÷10.47%

= $305,635.15

Nearest option $305,597.01 is correct option

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