Answer the following questions. Table 6-4 or Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required:

1. Spencer Co.'s common stock is expected to have a dividend of $7 per share for each of the next 9 years, and it is estimated that the market value per share will be $107 at the end of 9 years. If an investor requires a return on investment of 8%, what is the maximum price the investor would be willing to pay for a share of Spencer Co. common stock today?
2. Mario bought a bond with a face amount of $1,000, a stated interest rate of 10%, and a maturity date 17 years in the future for $985. The bond pays interest on an annual basis. Three years have gone by and the market interest rate is now 14%. What is the market value of the bond today?
3. Alexis purchased a U.S. Series EE savings bond for $150, and eight years later received $277.62 when the bond was redeemed. What average annual return on investment did Alexis earn over the eight years?

A. Spencer Co.'s common stock is expected to have a dividend of $7 per share for each of the next 9 years, and it is estimated that the market value per share will be $107 at the end of 9 years. If an investor requires a return on investment of 8%, what is the maximum price the investor would be willing to pay for a share of Spencer Co. common stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Maximum Price

B. Mario bought a bond with a face amount of $1,000, a stated interest rate of 10%, and a maturity date 17 years in the future for $985. The bond pays interest on an annual basis. Three years have gone by and the market interest rate is now 14%. What is the market value of the bond today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Market Value

C. Alexis purchased a U.S. Series EE savings bond for $150, and eight years later received $277.62 when the bond was redeemed. What average annual return on investment did Alexis earn over the eight years?

Alexis' average annual return on investment

%

TABLE 6.4 FACTORS FOR CALCULATING THE PRESENT VALUE OF $1 Discount Rate No. of Periods 14% 16% 18% 2% 4% 6% 8% 10% 12% 20% 0.8333 0.980 0.9615 0.9434 0.9259 0.9091 0.8929 0.8772 0.8621 0.8475 1 0.7695 0.7182 2 0.961 0.9246 0.8900 0.8573 0.8264 0.7972 0.7432 0.6944 0.5787 3 0.942 0.8890 0.8396 0.7938 0.7513 0.6750 0.6407 0.6086 0.7118 0.7921 0.7350 0.6830 4 0.924 0.8548 0.6355 0.5921 0.5523 0.5158 0.4823 0.906 0.7473 0.6209 0.5674 0.8219 0.6806 0.5194 0.4761 0.4371 0.4019 0.6302 0.7050 0.3704 6 0.888 0.7903 0.5645 0.5066 0.4556 0.4104 0.3349 0.5835 7 0.871 0.7599 0.6651 0.5132 0.4523 0.3538 0.3139 0.2791 0.3996 0.4039 0.2326 0.853 0.7307 0.6274 0.5403 0.4665 0.3506 0.3050 0.2660 O.1938 0.837 0.7026 0.5919 0.5002 0.4241 0.3606 0.3075 0.2630 0.2255 0.2267 0.3855 0.1911 10 0.820 0.6756 0.5584 0.4632 0.3220 0.2697 0.1615 0.6496 0.3505 0.1954 11 0.804 0.5268 0.4289 0.2875 0.2366 0.1619 0.1346 0.3186 0.788 0.6246 0.4970 0.3971 0.2567 0.2076 0.1685 0.1372 0.1122 12 0.773 0.2897 13 0.6006 0.4688 0.3677 0.2292 0.1821 0.1452 0.1163 0.0935 0.4423 0.1252 14 0.758 0.5775 0.3405 0.2633 0.2046 0.1597 0.0985 0.0779 0.5553 0.1079 0.0835 15 0.743 0.4173 0.3152 0.2394 0.1827 0.1401 0.0649 0.3936 16 0.728 0.5339 0.2919 0.2176 0.1631 0.1229 0.0930 0.0708 O.0541 17 0.3714 0.2703 0.1978 0.0802 0.0451 0.714 0.5134 0.1456 0.1078 0.0600 0.0691 0.3503 0.1799 0.0376 18 0.700 0.4936 0.2502 0.1300 0.0946 0.0508 0.1635 0.686 0.1161 0.0829 19 0.4746 0.3305 0.2317 0.0596 0.0431 0.0313 0.3118 0.0514 0.0365 0.0261 20 0.673 0.4564 0.2145 0.1486 0.1037 0.0728 0.1987 O.0926 0.0217 21 0.660 0.4388 0.2942 0.1351 0.0638 0.0443 0.0309 0.647 0.4220 0.2775 0.1228 0.0560 0.0382 0.0262 O.0181 22 0.1839 0.0826 0.2618 0.1703 0.1117 0.0491 0.0222 0.0151 23 0.634 0.4057 0.0738 0.0329 0.1015 0.0188 0.3901 0.0284 24 0.622 0.2470 0.1577 0.0659 0.0431 0.0126 25 0.610 0.2330 0.1460 0.0588 0.0378 0.0245 0.0160 0.0105 0.3751 0.0923 0.0334 0.0070 30 0.552 0.3083 0.1741 0.0994 0.0573 0.0196 0.01 16 0.0042 0.0356 0.0055 O.0017 35 0.500 0.2534 0.1301 0.0676 0.0189 0.0102 0.0030 0.0013 0.2083 0.0972 0.0460 0.0221 0.0107 0.0007 40 0.453 0.0053 0.0026 0.1712 0.0313 0.0006 45 0.410 0.0727 0.0137 0.0061 0.0027 0.0013 0.0003 0.1407 0.0035 0.0006 0.0001 50 0.372 0.0543 0.0213 0.0085 0.0014 0.0003 FACTORS FOR CALCULATING THE PRESENT VALUE OF AN ANNUITY OF $1 TABLE 6.5 Discount Rate No. of 14% Periods 2% 4% 6% 16% 20% 8% 10% 12% 18% 0.980 0.9259 0.8333 1 0.9615 0.9434 0.9091 0.8929 0.8772 0.8621 0.8475 1.942 1.7833 1.5278 2 1.8861 1.8334 1.7355 1.6901 1.6467 1.6052 1.5656 2.4869 2.1065 3 2.884 2.7751 2.6730 2.5771 2.4018 2.3216 2.2459 2.1743 3.1699 3.808 3.6299 3.4651 3.3121 3.0373 2.9137 2.7982 2.6901 2.5887 4.713 4.4518 4.2124 3.9927 3.7908 3.6048 3.4331 3.2743 3.1272 2.9906 4.3553 6 5.601 5.2421 4.9173 4.6229 4.1114 3.8887 3.6847 3.4976 3.3255 5.5824 4.8684 4.5638 4.0386 7 6.472 6.0021 5.2064 4.2883 3.8115 3.6046 4.3436 7.325 6.7327 5.7466 4.9676 4.6389 4.0776 3.8372 6.2098 5.3349 6.8017 4.6065 6.2469 8.162 7.4353 5.7590 5.3282 4.9464 4.3030 4.0310 8.983 8.1109 6.1446 5.6502 4.4941 10 7.3601 6.7101 5.2161 4.8332 4.1925 7.8869 9.787 8.7605 7.1390 6.4951 5.9377 5.4527 5.0286 11 4.6560 4.3271 10.575 4.4392 12 9.3851 8.3838 7.5361 6.8137 6.1944 5.6603 5.1971 4.7932 7.1034 13 11.348 9.9856 8.8527 7.9038 6.4235 5.8424 5.3423 4.9095 4.5327 5.4675 12.106 10.5631 9.2950 7.3667 6.6282 6.0021 5.0081 14 8.2442 4.6106 6.8109 12.849 11.1184 9.7122 8.5595 7.6061 5.5755 4.6755 15 6.1422 5.0916 4.7296 16 13.578 11.6523 10.1059 8.8514 7.8237 6.9740 6.2651 5.6685 5.1624 9.1216 5.2223 17 14.292 12.1657 10.4773 8.0216 7.1196 6.3729 5.7487 4.7746 14.992 12.6593 10.8276 9.3719 8.2014 7.2497 6.4674 5.8178 5.2732 4.8122 18 19 15.678 13.1339 11.1581 9.6036 8.3649 7.3658 6.5504 5.8775 5.3162 4.8435 4.8696 20 16.351 13.5903 11.4699 9.8181 8.5136 7.4694 6.6231 5.9288 5.3527 8.6487 6.6870 21 17.011 14.0292 11.7641 10.0168 7.5620 5.9731 5.3837 4.8913 17.658 14.4511 8.7715 7.6446 4.9094 22 12.0416 10.2007 6.7429 6.0113 5.4099 8.8832 14.8568 12.3034 6.7921 4.9245 23 18.292 10.3711 7.7184 6.0442 5.4321 24 18.914 15.2470 12.5504 10.5288 8.9847 7.7843 6.8351 6.0726 5.4509 4.9371 19.523 4.9476 25 15.6221 12.7834 10.6748 9.0770 7.8431 6.8729 6.0971 5.4669 17.2920 13.7648 11.2578 8.0552 7.0027 6.1772 5.5168 4.9789 30 22.396 9.4269 9.6442 35 24.999 18.6646 14.4982 11.6546 8.1755 7.0700 6.2153 5.5386 4.9915 4.9966 40 27.355 19.7928 15.0463 11.9246 9.7791 8.2438 7.1050 6.2335 5.5482 45 20.7200 15.4558 9.8628 8.2825 7.1232 5.5523 4.9986 29.490 12.1084 6.2421 12.2335 50 31.424 21.4822 15.7619 9.9148 8.3045 7.1327 6.2463 5.5541 4.9995