I ONLY NEED 1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.

FIN 312-1M

1, 3, 4, 6, 8, 10, 11, 12, 13 and 14.

Name ____________________________________________________ Score______________

1) You want to buy a car 3 years from now and plan to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have in the account just after you make the third deposit, 3 years from now?

2) Bank A has quoted you a 5.83% nominal interest rate for a loan. The loan is compounded monthly. Bank B charges 5.8% interest compounded weekly. Which bank should you borrow from?

3) You have just borrowed $6,372.90 to finance the purchase of a used car. The nominal annual interest rate is 12 percent. You have agreed to repay the loan over a two-year period by making monthly payments. What is the monthly payment on this loan?

4) Your father is about to retire and he wants to buy an annuity that will pay him $85,000 per year for 25 years, with the first payment coming immediately. The interest rate is 5%. How much will it cost him to buy the annuity today?

5) You expect to receive an inheritance of $200,000 in 30 years. If the interest rate is 9%, what is the inheritance worth today?

6) You plan to make a series of deposits into an interest-bearing account earning 11%. You will deposit $2,000 today, $3,000 two years from today, and $9,000 five years from today. If you withdraw $2,000 four years from today and $5,000 seven years from today, how much will you have at the end of eight years?

7) How much would you pay for an investment that promises to pay you $500 at the end of each year for the next three years and $600 at the end of years four through six if you require a 10% return?

8) The current dividend of Yellowjacket Corporation is $2.80 per share. This dividend is expected to grow at an annual rate of 5 percent per year for the foreseeable future. The required rate of return is 9%.

a. What is the current value of this stock?

b. If the stock sold for $98, what is the rate of return?

9) ABC cumulative preferred stock is currently selling for $84 with a dividend of $5.46. What is the rate of return?

10) XYZ, Inc. is planning to offer a $1,000 face value 10-year bond with a coupon rate of 8%. The coupon payments are made semi-annually. If you require a 10 percent rate of return, what is the price you would pay for this bond?

11) XYZ Inc. has a capital structure that consists of 40% debt and 60% common stock. Dividends are growing at a constant rate of 5% and the current dividend is $2.00. The stock is currently selling for $21.88. The before tax cost of debt is 14% and the firm’s marginal tax rate is 40%.

a. What is the rate of return on the stock?

b. Using the rate of return on the stock as the cost of equity, what is the weighted average cost of capital (WACC)?

12)XYZ common stock is expected to pay a dividend of $2.75 next year and currently sells for $44. Dividends are expected to grow at a constant rate forever. Determine the growth rate assuming that the required rate of return is 12.25%.

13)Merton Enterprises pays a constant $5 dividend on its stock. The company will maintain this dividend for the next 10 years and then cease paying dividends forever. If your required rate of return is 8 percent, what is the value of this stock?

14)Using the capital asset pricing model (CAPM), what is the required rate of return on a stock if the risk-free rate of return is 5%, the return on the market is 11%, and beta is equal to 1.2?

15) Briefly explain the difference between systematic risk and unsystematic risk. Is it possible to eliminate either type of risk through diversification? Explain why or why not? Which type of risk is measured with beta?