1. At a growth (interest) rate of 8% annually, how long will it take for sum to double? To triple? Choose year that is closest to the correct answer.
2. Find out amount of money in savings account at the end of five years given initial deposit of $3,000 and 8 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly.
3. You require $23,956 at the end of nine years, and your only investment outlet is 7% long-term certificate of deposit (compounded annually). With certificate of deposit, you make initial investment at the starting of first year.
a. What single payment could be made at starting of first year to get this objective?
b. What amount could you pay at the end of each year annually for nine years to get this same objective?
4. Laser Optics will pay common stock dividend of $1.60 at the end of year (D1). Required rate of return on common stock (Ke) is 13 percent. Firm has constant growth rate (g) of 7 percent. Calculate present price of stock (P0).