Name Date FINA 3103 Principles of Finance- Fall 2017-Quiz 6-Version 2 In the fir
ID: 2779704 • Letter: N
Question
Name Date FINA 3103 Principles of Finance- Fall 2017-Quiz 6-Version 2 In the first 3 questions, please make only one choice per question. Show your answer for question 4. You have 10 minutes. Please remember that this is NOT a group work; that is, you need to do it on your own! The dividends on a share of preferred stock which pays a fixed dividend forever is an example of a perpetuity a. TRUE b. FALSE 1. 2, what is the present value of $1,300 to be received in 6 years, if the discount rate is 5.8%? a. $926.89 b. $871.12 c. $762.29 d. $879.57 To compound $100 quarterly for 15 years at 8%, we must use a, 30 periods at 4% b, 60 periods at 2% C. 60 periods at 8% d, 15 periods at 2% 3. Calculate the future value of a $600 ordinary annuity invested for 4 years? Assume a discount rate of 5% compounded annually 4. Your answer:Explanation / Answer
1) True. Perpetuity means a series of payment forever. Note that the payment should be same in all the years.
2) We have FC = 1300 and Discount Rate = 5.8% , Time Period = 6 years
The PV = 1300 / (1+ 0.058)6 = 926.89 which is option A
Please note, As it was not mentioned specifically which question needs to be answered, I am answering first 2.
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