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

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