You have the choice between
$10,000 now and $25,000 in 10 year’s time. If the appropriate discount
rate is 5 percent per annum, what should you choose?
(b) The following amounts
are saved at the end of each month: $500, $450, $300, $600, $720, $560.
What will be their total value at the end of the period if the interest
rate is 6 percent per annum (compounding monthly).
(c) How much should you pay
for a bond that promises to pay 7 percent per annum on its face value of
$100 and has a maturity of 30 years. The appropriate discount rate is 8
percent per annum.
(d) A company currently pays
$0.65 in dividends each year. If you expect the growth rate of the
dividends to be a constant 12 percent per annum, what should the shares
sell for? Your discount rate is 15 percent per annum.
Question Five
Briefly outline (in no more than 2 paragraphs) two (2) reasons why a firm might find it difficult to change its dividend policy?
Click here: You have the choice between $10,000 now and $25,000 in 10 year’s time
