Question 1

You are offered the opportunity to buy a note for $10,000. The note is certain to pay $2000 at the end of each of the next 15 years. If you buy the note, what rate of interest will you receive on this investment (to nearest %)

a. 20%

b. 18%

c. 100%

d. 15%

e. insufficient information to compute

Question 2

Williams Inc. is expected to pay a $4 dividend next year and that dividend is expected to grow at 3.4% every year thereafter. If the discount rate is 11.4%, what would be the present value of the expected dividend stream (aka the expected price of the firm's stock)?Answer to 2 decimal places.

Question 3

You have just taken out a 30 year, $120,000 mortgage on your new home. This mortgage is to be repaid in 360 equal monthly installments. If the stated (nominal)annual interest rate is 15.11percent, what is the amount of the INTEREST portion of the FIRST monthly installment?

Question 4

If you can obtain bank financing at 5.45% APR (with monthly compounding) on a 5-year,$29,435 car loan, what would be the monthly loan payments?Answer to 2 decimal places.

Question 5

Next year you will begin receiving $173 per year in perpetuity from a family trust fund (first payment is exactly 1 year from today). You have decided to discount these cash flows at a constant interest rate of 5.8%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.) Answer to 2 decimal places.