7) What is the present value today of an ordinary annuity cash flow of $3,000 per year for forty years at an interest rate of 10.0% per year if the first cash flow is six years from today?

A) $120,000.00

B) $1,327,777.67

C) $45,138.89

D) $33,730.40

Answer: Show your work

8) The financial aid office at your university has offered to pay your full annual tuition cost of $22,000 this year, as long as you maintain a grade point average of 3.00. If tuition costs rise at a rate of 6% per year while you are in college, but the financial aid office continues to pay exactly $22,000 per year for your tuition, how much out-of-pocket tuition costs will you have your senior year? NOTE: Think carefully about this problem when figuring the number of years from the start of your freshman year to the start of your senior year, assuming normal progress toward graduation in four years. Further, be aware that while tuition costs are rising your tuition is covered up to only $22,000. You must pay any excess tuition costs.

A) $0

B) $3,351

C) $4,202

D) $5,774

Answer: Show your work

9) You dream of endowing a chair in finance at the local university that will provide a salary of $150,000 per year forever, with the first cash flow to be one year from today. If the university promises to invest the money at a rate of 5% per year, how much money must you give the university today to make your dream a reality?

A) $3,000,000

B) $15,000,000

C) $2,857,143

D) This question cannot be answered.

Answer: Show your work

10) Your parents have an investment portfolio of $400,000, and they wish to take out cash flows of $50,000 per year as an ordinary annuity. How long will their portfolio last if the portfolio is invested at an annual rate of 4.50%? Use a calculator to determine your answer.

A) 8.00 years

B) 9.10 years

C) 9.60 years

D) 10.14 years

Answer: Show your work

11) Dividend growth rate is important to many investors. You are considering investing in a firm after looking at the firm's dividends over a seven-year period. At the end of the year 2002, the firm paid a dividend of $1.15. At year-end 2009, it paid a dividend of $1.84. What was the average annual growth rate of dividends for this firm?

A) 7.25%

B) 9.86%

C) 6.94%

D) There is not enough information to answer this question.

Answer: Show your work