Assignment task:
Marie needs $26,000 as a down payment for a house 4 years from now. She earns 5.65% on her savings. Marie can either deposit one lump sum today for this purpose or she can wait a year and deposit a lump sum. How much additional money must Marie deposit if she waits for one year rather than making the deposit today? 1,179.08 $1,112.36 $1,011.13 Question 2 Apple Corporation issued $100 million bonds that mature in 30 years and have a 5% coupon rate that is paid annually. If the bonds were sold to yield 5.4%, determine the price of the bonds at the end of year 5. Question 43 options: $95,958,151 94,581,667 $95,500,206 95,500,206 Question 3 What would you pay today for a stock that will pay a $1.50 dividend next year and dividend growth rate is 3% after that and you require a 16% return on your investment? 11.54 $12.33 $11.88 Question 4 Boomer Products, Inc. manufactures "no-inhale" cigarettes. As its target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a rate of 4% annually forever. The firm just paid a dividend of $2.50; given a required return is 12%, the price of the stock in two years will be: Question 45 options: $13.82 $9.45 11.52 Question 5 Investment Corporation is considering a portfolio with 70% weighting in a cyclical stock and 30% weighting in a countercyclical stock. It is expected that there will be three economic states; Good, Average and Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of 25%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively. Given this information, calculate portfolio variance. Investment Corporation is considering a portfolio with 70% weighting in a cyclical stock and 30% weighting in a countercyclical stock. It is expected that there will be three economic states; Good, Average and Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of 25%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively. Given this information, calculate portfolio variance. 0.0035 0.0045 0.0025 Question 6 Given the following information for Groto Corp. find the WACC. Assume the company's tax rate is 40%. Bonds: 10,000 9% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 98% of par; the bonds make semi-annual payments. Common shares: 300,000 shares outstanding, selling for $40 per share; the beta is 0.95. Preferred shares: 55,000 shares of 6% preferred stock outstanding, currently selling for $100 per share. 10% market risk premium and 3% risk-free rate. 8.69 9.02 10.12