Chapter 4: Q10BP-d (page 282)
How much would you have to invest today to receive
d. $50,000 each year for 50 years at 7 percent?
An investor has to invest $690,037.31 today in order to receive $50,000 each year for 50 years.
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Question: Phil Goode will receive $175,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future “pot of gold”?
Question:Analogue Technology has preferred stock outstanding that pays a \(9 annual dividend. It has a price of \)76. What is the required rate of return (yield) on the preferred stock?
Stilley Resources bonds have four years left to maturity. Interest is paid annually, and the bonds have a \(1,000 par value and a coupon rate of 5 percent. If the price of the bond is \)841.51, what is the yield to maturity?
Question:Stagnant Iron and Steel currently pays a $12.25 annual cash dividend (D0). The company plans to maintain the dividend at this level for the foreseeable future as no future growth is anticipated. If the required rate of return by common stockholders (Ke) is 18 percent, what is the price of the common stock?
Question: C. D. Rom has just given an insurance company \(35,000. In return, he will receive an annuity of \)3,700 for 20 years. At what rate of return must the insurance company invest this $35,000 in order to make the annual payments?
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