1. Consider the following cash flow in actual dollars. The inflation rate is 3.4%. The inflation-free interest rate is 10.5%. What is the net present worth of the cash flow? The cash flow in actual dollars for year 0 through 3 is -$49, $16, $16, and $35 respectively.
2. In reference to long term bonds and short run bonds. One year later all market interest rates increase by 2%. What will happen to the market value of the bonds, which bond will see a greater increase/decline in price and why.
3. Joker stock has a sustainable growth rate of 8 percent, ROE of 114 percent, and dividends per share of $1.65. If the P/E ratio is 19, what is the value of a share of stock?