10. You plan to invest $2,000 in an individual retirement arrangement (IRA) today at a stated interest rate of 8%, which is expected to apply to all future years. a. How much will you have in the account at the end of 10 years if interest is compounded as follows? (1) annually (2) semiannually (3) daily (assume a 365-day year) What is the effective annual rate (EAR) for each compounding period in part a? 11. A bond makes annual interest makes annual interest payments of $75. The bond matures in 4 years, has a par Vare on 1,000, and sells for $975.30. What is the bond's yield to maturity (YTIME 12. A bond offers a counon rate of 5 %. If the par value is $1,000 am is the coupon yield? %. If the par value is $1,000 and the bond sells for $1,250, what 13. A $1,000 par value bond pays a coupon rate of and it matures in four years. If investors require a 10 bond's price? Pays a coupon rate of 8 96 The bond makes semiannual payments turn on this investment, what is the 14. Taco Express is expected to pay a $1.57 dividend next year grow by 5% each year forever. If the required return on thes should be the price of the stock today? end next year and investors expect that dividend to return on the stock investment is 14%, what 15. ABC Wood Distributors sells construction material throughout the state of Illinois. Because of population growth and a construction boom in recent years, the company has prospered and expects to continue to do well in the near term. The company will pay a $0.75 per share dividend to investors one year from now. Investors believe that ABC Wood Distributors will increase that dividend at 15 % per year for the sub-sequent 5 years before settling down to a long-run dividend growth rate of 3 %. Investors expect an 8 % return on ABC Wood common shares. What is the current selling price of the stock? 16. After careful research, you find the present value of the free cash flows of a firm to be $100 million. The market value of the firm's preferred stock is $15 million, while the market value of the firm's debt is $40 million. If the firm has 2 million shares of stock outstanding, what is the equity value per share? 17. A firm has the following accounts and financial data for 2018: $1,800 Sales revenue Accounts receivable Interest expense Total operating expenses Accounts payable $3,060 500 126 600 240 Cost of goods sold Preferred stock dividends Tax rate Number of shares of common stocks outstanding 18 40% 1,000 The firm's earnings available to common stockholders in 2018 is
