Finance

a) JRN Enterprises just announced that it plans to cut its dividend from

$ 2.00

$2.00

to

$ 1.40$2.00 to $1.40

per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at

33%

per year and JRN's stock was trading at

$ 26.00$26.00

per share. With the new expansion, JRN's dividends are expected to grow at

66%

per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to:

a. $26.00

b. $18.20

c. $29.84

d. $42.63

b) Sara wants to have $500,000 in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of 9%, to ensure that she has $500,000 in 20years time?

a) $160,587

b) $124,901

c) $96,903

d) $89,215

c)$ 5 comma 000

$5,000

bond with a coupon rate of

6.1 c) A $5,000 bond with a coupon rate of 6.1%

paid semiannually has

fourfour

years to maturity and a yield to maturity of

6.26.2%.

If interest rates fall and the yield to maturity decreases by 0.8%, what will happen to the price of the bond?

a) Fall by $141.89

b) fall by $170.27

c) rise by $141.89

d) rise by $1988.65