3.You deposit $900 into a bank account today. Approximately how much interest (in dollar amount) will be earned in just the second year if the interest rate is 7% p.a. compounded annually?

$67.41

$63.00

$126.00

d. $105.62

4.Bill and Mary Gates have just established a fund to provide scholarships for Vietnamese students. The first scholarships will be granted one year from now for a total of $35,000. Annually thereafter, the scholarship amount will be increased by 5.5% p.a. to help offset the effects of inflation. The scholarship fund will last indefinitely. How much money Bill and Mary Gates have to put into the fund today at a discount rate of 8% p.a.?

$437,500

$750,000

$1,200,000

$1,400,000

5.Phil intends to enter into a 5 year mortgage loan to finance for his new car. The maximum repayment that he can afford is $180 a month for a loan. If the interest rate is 8.6% p.a., compounded monthly, what is the most expensive apartment Phil should be looking at?

$7,750.00

$8,348.03

$8,752.84

$9,266.67

6.What is the yield to maturity on a zero-coupon bond with the following terms? Time to maturity 5 years Face value $1,000,000 Current market price $543,987

6.05%

12.95%

36.77%

1.84%

7.One year ago, you bought a 5-year bond that paid coupon rate of 9% for $1,100. Now you sell the bond for $1,085. What is your rate of return on your investment over the year?

6.82%

6.91%

7.64%

9.00%

8.A 3-year bond with a 7% coupon and a 10% yield to maturity is currently worth $925.39. How much will it be worth 1 year from now if interest rates are constant?

$904.90

$925.39

$947.93

$1,000.00

9.Gellis Co. common stock currently sells for $22 a share and pays an annual dividend that increases by 5% annually. The market rate of return on this stock is 9%. What is the amount of last dividend paid by Gellis Co.?

$0.84

$1.89

$1.98

More information is needed to answer this question

10.The Merriweather Co. expects to pay dividends of $1.60 in next year and is establishing a policy whereby the dividend will grow by 5% in the next following 2 years and 3.5% thereafter. What is the market price of Merriweather Co.s share today if the required return is 12%?

$20.03

$18.19

$19.31

$15.04

11.Corporation has a stock price of $32.35 per share. The last dividend was $3.42. The long-run growth rate for the company is a constant at 7%. What is the companys capital gains yield and dividend yield?

Capital gains yield 7%; dividend yield 10.57%

Capital gains yield 10.57%; dividend yield 7%

Capital gains yield 11.31%; dividend yield 7%

Capital gains yield 7%; dividend yield 11.31%

12.General Matter Ltd has recently paid a dividend of $3.4 per share. The dividend is then expected to increase for the following 4 years at 20% per year, and then 6% per year indefinitely. What is the expected dividend in the year of 6?

$7.05

$4.82

$7.92

$10.15

13.Martin Felipe saves $350 a month for 40 years. If the APR is 8.5% p.a. compounded monthly, what is his account balance at the end of the 40 years?

$168,000.00

$789,518.23

$793,004.61

$1,413,528.32

14. Lynn purchases a $100 perpetuity on which payments begin in one year. Joe purchases a $100 perpetuity on which payments begin immediately. Which one of the following statements is true if the applicable discount rate is 10%. .?

Joes perpetuity is worth $100 more than Lynns

Lynns perpetuity is worth $100 more than Joes

The perpetuities are worth equal value today

Joes perpetuity is worth $90.91 more than Lynns

Lynns perpetuity is worth $90.91 more than Joes

15.You have $1,398.16 in your savings account today. You plan on adding $130 a month to this account for the next 5 years. The account pays 2.5% p.a. compounding monthly. How much money will you have in your savings account at the end of the five year?

$9,883.00

$8,299.27

$10,123.92

$8,671.54

16.All else equal, the market price of a corporate bond is always inversely related to its I. Time to maturity II. Coupon rate III. Yield to maturity

I only

II only

III only

I and III only

I, II and III

17.You have just won the lottery prize. You have options to choose to receive $25,000 five years from now or $70,000 eleven years from now. At what implied compound interest rate should you be indifferent between the two options?

12.25%

18.72%

22.87%

Not be able to determine