QUESTION $1$

a$)$ If the cost of capital is $9$ percent, what is the present value of $$374$ paid in year $9?[2$ marks$]$

b$)$ If you invest $$100$ at an interest rate of $15$ percent, how much will you have at the end of $8$ years? $[3$

marks$]$

c$)$ An investment of $$232$ will produce $$312\mathrm{.}18$ in $2$ years. What is the annual interest rate? $[3$ marks$]$

d$)$ Common stock will pay cash dividend of $$4$ next year. After that, the dividends are expected to increase

indefinitely at $4$ percent per year. If the discount rate is $14$ percent, what is the present value of the

dividend payments? $[3$ marks$]$

e$)$ Peter is investing $$5,000$ at a stated annual interest rate of $12$ percent per year, compounded quarterly,

for five years. What is his wealth at the end of five years? $[4$ marks$]$