QUESTION 5

1. You find the end of the rainbow. At the end of the rainbow, a leprechaun offers you $5,000 a year (starting a year from today) forever. The discount rate is 5%. What is the PV of this cash flow stream?

   		$95,238
   		$4,762
   		$100,000
   		$5,000

10 points

QUESTION 6

1. You think Tesla is future. You think a share of Tesla has a present value of $300. If the next dividend for Tesla is $20 and the cost of capital for Tesla is 15%, what do you think the growth rate of the dividends is? (Hint: This is a growing perpetuity)

   		8.33%
   		6.67%
   		21.67%
   		15%

10 points

QUESTION 7

1. To buy a new car, you take out a loan. For the next 5 years (starting a year from now), you will pay $5,000 to the bank. The discount rate is 8%. How much did you borrow from the bank? (Hint: present value)

   		25,000
   		23,148
   		19,964
   		15,971

10 points

QUESTION 8

1. Exxon issues an annual coupon bond. The bond has face value of $1,000, a coupon rate of 9%, a YTM of 5%, and 8 years to maturity. What is the price of Exxons bond?

   		$2,059
   		$1,259
   		$1,720
   		$1,040

10 points

QUESTION 9

1. UH wants to fund the new medical school by taking out some debt. UH decides to issue a SEMI-annual coupon bond. The bond has face value of $1,000, a coupon rate of 5%, a YTM of 8%, and 15 years to maturity. What is the price of this UH bond?

   		$1,000
   		$980
   		$820
   		$741

10 points

QUESTION 10

1. The US treasury issues a 10 year, zero-coupon bond. The face value of this bond is $1,000 and the YTM is 2%. What is the price of this treasury bond?

   		$820
   		$1,219
   		$980
   		$1,000

10 points

QUESTION 11

1. Apple issues an annual coupon bond. The bond has face value of $1,000, a coupon rate of 2%, a YTM of 6%, and 12 years to maturity. If the bond does not default, what is the discount rate?

   		6%
   		12%
   		2%
   		4%

10 points

QUESTION 12

1. You want to invest in Lululemon. They expect to pay a $4.4 dividend next year. The cost of capital for Lululemon is 9% and the growth rate of the dividend is expected to be 5%. What is the price of the stock? (Do not include dollar sign in answer)