Q1a. State the relationship between effective - and nominal interest rate.

Q1b. What is a feasibility study? Explain briefly.

Q2a. What will $1,000 amount to in 5 years, if the interest rate is 6% per annum compounded semi-annually and quarterly?

Q2b. Merve plans an investment into a stock that has a dividend payment of $2.5, $2.75, $2.80, respectively, from year 1 to year 3. If the sellingprice at the end of the holding period (year 3) is $18 abd her required rate of return is 10%, what can be the purchasing price of the stock (P₀)?

Q3a. What are the basic types of the bond and is there a relationship between the collateral and bond price? Explain briefly. Q3b.Is there a relationship between share price and dividend? Which other factors impact the share price?

Q4. Initial investment for a project is $ 10,000, and scrap value is expected to be $4,200; the expected annual net cash flows generated from an investment are given below.

Years Cash flows

1 2,500

2 2,800

3 3,000

4 3,000

5 3,200

Suppose that the companys WACC is 10%, calculate the IRR, payback period and comment feasibility on the projects (Use the discount factor and indicate all the step you calculate).