3. You have just received notification that you have won the $1 million first prize in the Lottery. However, the prize will be awarded in 80 years. What is the present value of your windfall if the discount rate is 7.25%

4. You are scheduled to receive $13,000 in two years. When you receive it, you will invest if for six more years at 7.5% per year. How much will you have in eight years?

5. If the discount rate is 10% what is the present value fo the cash flows? Year Cash Flow

1 $680

2 $ 490

3 $975

4 $ 1,160

6. The discount rate is 8%, what is the future value of these cash flows in year 4?

Year Cash Flow

1 $985

2 $1,160

3 $1,325

4 $1,495

7. For each of the following annuities calculate the annual cash flow.

Present Value Years Interest Rate

$24500 6 11%

$19700 8 7%

8. You deposit $5,000 at the end of each year for 20 years into an account paying 9.6% interest, how much money will you have in the account in 20 years?

9. Lycan Inc. has 7% coupon bonds on the market that have 9 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 8.4%, what is the current bond price?

10. The Timberlake Co. has 7% coupon bonds in the market with 9 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the bonds currently sell for $961.50, what is the YTM.

11. Volbeat Co. has bonds on the market with 10.5 years to maturity, a YTM of 6.2%, a par value of $1,000, and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bonds? 4. If Treasury bills are currently paying 4.5% and the inflation rate is 1.6%, what is the approximate real rate of interest? The exact real rate?

12. Gilmore Inc. just paid a divident of $2.35 per share on its stock. The dividends are expected to grow at a constant rate of 4.1% per year, indefinitely. If investors require a return a 10.4% on this stock, what is the current price?

13. Mitchell Inc. has a constant 4.6% percent growth rate in its dividends. If the company has a dividend yield of 5.8%, what is the required return on the company's stock.

3. Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $3.45 dividend every year, in perpetuity? If this issue currently sells for $77.32 per share, what is the required return?

4. The Sleeping Flower Co. has earning of $2.65 per share. The benchmark PE for the company is 18. What stock price would you consider appropriate? What if the benchmark PE were 21?