10) Travis invested $9,250 in an account that pays 6 percen have earned over a 7

Question

10) Travis invested $9,250 in an account that pays 6 percen have earned over a 7-year period if simple interest. How much mors could he the interest had compounded annually? a) $74141 b) $773.58 c) $802.16 d) $833.33 11) You would lik from now. e to give your daughter $75,000 towards her college education 17 years percent on your How much money must you set aside today for this purpose if you can earn 8 investment? a) $18,388.19 b) $20,270.17 c) $28,417.67 d) $29,311.13 of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the par value is $1,000? 12) Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity a) $989.7 b) $991.47 c) $996.48 d) $1,002.60 13) Northern Gas recently paid a $2.80 annual dividend on its common stock. This dividend increases at an average rate of 3.8 percent per year. The stock is currently selling for $26.91 a share. What is the market's expected rate of return for the stock based on the Gordon (or Constant) Growth Model? a) 13.88% b) 14.03% c) 14.21% d) 14.60% 14) You are considering the following two mutually exclusive projects. The required rate of return is Which project should you accept and why? 14.6 percent for project A and 13.8 percent for project B. Year Project A Project B $50,000 $50,000 0 24,800 36,200 21,000 41,000 20,000 10,000 Page

Explanation / Answer

10) Account balance after 7 years - Annual compounding $ 13,908.58 9250*(1+6%)^7 Less: Account balance after 7 years - Simple interest $ 13,135.00 9250*(1+6%*7) More interest earned $        773.58

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