Problem set Bonds, Stocks, Capital Budgeting
Problem set (Bonds, Stocks, Capital Budgeting):Â
Show your work for full credit!!Â
1. (10 points)Â
Today is your 21st birthday and you just decided to start saving money so you can retire early. Thus, you are going to save $500 a month starting one month from now. You plan to retire as soon as you can accumulate $1 million. If you can earn an average of 8 percent on your savings, how old will you be when you retire? Â
2. (10 points)Â
At the end of this month, Les will start saving $150 a month for retirement through his company's retirement plan. His employer will contribute an additional $0.50 for every $1.00 that he saves. If he is employed by this firm for 30 more years and earns an average of 10.5 percent on his retirement savings, how much will Les have in his retirement account 30 years from now? Â
3. (10 points)
 Due to additional financing needs, XYZ Corporation wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000, and pay $42.50 in interest every six months. If investors require a 8.5 percent return on XYZ’s bond, how many new bonds must XYZ issue to raise $30,000,000 cash?Â
4. (10 points)
 Two years ago, Ford Motor Company sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate, and semiannual interest payments. Now the going rate of interest on bonds such as these fell to 6 percent. At what price would the bonds sell?
 5. (10 points)
 Greenville Corp. pays a constant $8 dividend on its stock. The company will maintain this dividend for the next seven years and will then cease paying dividends forever. If the required return on this stock is 8 percent, what is the current share price?Â
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Answers
Status NEW
Posted 22 Apr 2017 11:04 AM
My Price 5.00
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Attachments
file 1492862531-Problem set Bonds Stocks Capital Budgeting.docx preview (563 words )
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