1. What is the value of a share of stock of XYZ to an investor who requires a 12 percent rate of return of return if XYZ's current dividend is $0.30 each quarter? Assume earnings and dividends are expected to grow at a compound annual rate of 7 percent.
$25.68
$24.00
$19.62
$18.34
2. Kathy Johnson is 30 years old today and beginning to save for her retirement. She would like to set aside an equal amount at the end of each of the next 30 years so that she can retire at age 60. She expects to live until age 85 and wants to be able to withdraw $45,000 from her 61st to 85th birthday. The account is expected to earn a 10% per year for the entire period of time. Determine the size of the annual deposits to be made.
$2483.17
$3057.01
$6217.41
$6839.15
3. Larry makes quarterly (end of period) $3,500 payments into a pension fund earning 9% per year compounded quarterly for 6 years, at the end of the 6 years how much is in the account?
$91,560.00
$109,785.91
$112,256.09
$268,764.35
4. LM has common stock that sells for $50. Dividends are expected to continue to grow at a rate of 7% annually. If investors in LM require a 13% rate of return, what is the current dividend?
$3.00
$2.80
$3.50
$2.50
5. An investor plans to invest 75 percent of her funds into the common stock of TY and 25 percent of her funds into ID. The expected return from TY is 12 percent and the expected return on ID is 16 percent. The standard deviation of TY is 8 percent and the standard deviation of ID is 12 percent. The correlation between TY and ID is +.8. Determine the expected return for her portfolio.
14%
12%
13%
9%