1. Suppose you invest $80,000 in the Raiford Commercial Bank paying 7.0% interest for exactly n = 9 years. You then leave the money in the bank but starting at n + 1, you make 4 annual withdrawals of an equal amount, emptying the account as the bank continuous to pay the same annual interest rate as during the accumulation period.  To figure out the cash flows, create a time diagram.

 

2. If you are investing $15,000 for n = 15 years at 9.3% annual interest with compounding, how much more money would you have at the end of those n years compared to being paid back over the same time period and at the at the same annual interest rate but calculated as only simple interest without compounding? 

3. The Marco Corporation is paying dividends of $1.16 at t = 1 ( this is at t = 1, not t = 0) which will then grow at rate of 10% between t = 1 and t = 2 only and thereafter grow at the rate of 4% into the foreseeable future. What should be the price, to the nearest cent, of the Marco Corp. stock if you were to use 8% to discount the risky cash flows? 

4. Flagler Inc. is paying dividends of $2.10 at t = 0 (not t = 1) which will then grow at a constant rate of 5.1% from that point into the future. What should be the price of Flagler stock, if the cash flows for stocks of equivalent risk are usually discounted using an 7.9% discount rate?