Question 3 (25 marks = 5 marks each)

a. Assume that you want to have $HK 40,000 in your saving account in year 2024. If your account earns 5% annually and you deposit today $7000, calculate how much you need to deposit in equal annual payments in the each of the remaining years to achieve saving goal.

b. Common stock that just paid a dividend of $HK 10 has market price of $HK 250. Calculate the growth rate of dividend of this common stock if your required return is 11%.

c. Assuming that corporate bond pays coupon of 10 % of par value of the bond. If par value/face value of the bond is $HK 10000, how much you would pay for this bond if your discount rate/required rate of return is equal to 14% and maturity of the bond is 10 years.

d. Assuming that you finance car with value of $HK 220000 for 6 years and at 7% interest rate calculate the following:

a) Annual payment

b) Total interest paid over the life of loan

e) As a financial planner you receive a call from the customer of your company who is planning to retire in year 2035. The person wants to withdraw from its account from 2035 until 2055 exactly $HK 120,000 per year. How much money the person needs to deposit in equal sums each year until 2035 if her/his interest rate is 8% and she/he receives a gift of $HK 200,000 in year 2021 and deposits that gift it in the same account.