Problems (4 pts): 7.(a) Which would you prefer, an ordinary annuity that pays $500 for four years at a rate of 4.8% or an annuity due of $475 that pays a fate of 4.95% for four years? (b) Assume I have an investment that will pay me $100 every month for 5 years and then $5,000 at the end. If I pay $4,800 for it today, what is my rate of return? 8.(a) (1 point) Assume you are planning for retirement. Your salary is $50,000, you are 22 years old, you plan to contribute 15% of your income each year to retirement, which will occur at age 65 , and you expect to earn 8.2% a year on your money. How much will you have at retirement? (c)(2 points) Now assume that you can actually earn 5% on your money in retirement, how much more or less than $1,000,000 can you leave your heirs? 9. Proctor and Gamble has an expected return of 7.3% and a standard deviation of 5.48%. Given the following information for Meta, which stock would you choose and why if we assume they have equal betas? 10.(a) Assume you are examining whether to purchase (if you do not own) or sell (if you do own) Bulldog Trucking Inc. You have estimated the beta for the company to be 1.23, the current one-year Treasury rate is 5.41%, and the expected market return is currently 11.64%. What is the required return for Bulldog Trucking? (b)Now assume that you are doing your own analysis of Bulldog Trucking. The current stock price is $44.57 and they just paid a dividend of 1.86 per share. After careful analysis, you have estimated that dividends will grow in perpetuity by 8%. What is your expected return for Bulldog Transportation? (c)Given your answers from (a) and (b), should you buy or sell Bulldog Trucking and why? (d)What should the new price of the stock be if your growth rate of 8% is accurate? 11.(a) (1 point) Zabberer Corporation bonds pay a coupon of 12% annually and have a par value of $1,000. They are scheduled to mature in 14 years; however, the firm can call the bonds in 8 years at a 12% premium to par. Assume you believe the company will actually call the bond then. You require a return of 10% on bonds with this risk today, how much would you pay for this bond today? (b) (1 point) Assume there is a bond selling for 98.275 , as quoted in the WSJ. The bond has a coupon of 3.7% and matures in 6 years, what is the bond's YTM? (c)(2 points) If you purchase this bond, will you likely receive the stated YTM, why or why not? 12.(a) (1 point) Assume you have a stock that expects to pay a dividend of $1.36 one year from today. The consensus forecast is that the dividends will grow at a 6% rate in perpetuity. If the firm's cost of equity is 12.2%, how much should the stock sell for today? (b)(1 point) Now assume that the current stock price is $18 per share. What growth rate is the market assuming for dividends? (c) (2 points) Assume ExxonMobil announces that it must shut down two of its refineries for 6 months to address safety concerns. As a result, as an analyst, you assume that dividends will decline by 4% a year for the next three years and then revert to its long-term rate of 7% in perpetuity. The current dividend is $3.10 and XOM's cost of equity is 12%. What is the new stock price for XOM today