Question

Question 9 4 pts

You buy 1,000 shares of stock at $5.00 per share in January of 2004. You sell the stock at $7.50 per share in January of 2007. What is your internal rate of return (IRR)?

Group of answer choices

14.47%

87.36%

18.00%

1.1447%

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Question 10 4 pts

A noted free agent running back just signed a four-year, 30-million dollar contract with a new team. He will get a 7-million dollar signing bonus and a 4.5-million dollar roster bonus. Additionally, he will get 3.25 million for year one, 5.25 million for year two, 5 million for year three, and 5 million for year four. Salary is paid at the end of the first year. Find the present value of his contract if money can earn 6%.

Group of answer choices

$15,897,083.78

$27,397,083.78

$30,000,000

$23,911,000.35

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Question 11 4 pts

Banks calculate the monthly payment on a loan as

Group of answer choices

as an ordinary annuity with payment made one month is advance.

as an ordinary annuity with payment made at end of month.

as an annuity due with payment made one month in advance.

as an annuity due with payment made at end of month.

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Question 12 4 pts

You have an absolutely brilliant child who is six years old and will be attending a private college in twelve years. You know that in twelve years a four-year college will cost at least $70,000 per year (total $280,000), including tuition, books, and room and board. If you can earn 12 percent on a mutual fund investment during the next twelve years, how much will you have to invest at the beginning of each year to have enough to send your child to college for four years?

Group of answer choices

$4,484.33

$10,359.20

$5,022.45

$11,602.30

Answer 1

Answer to Question-9:
Particulars	Working	Amunt($)
Total amount invested in the shares as on Jan,2004	(1000*5)	5000
Sales realisation on shares sold as on jan,2007	(1000*7.5)	7500
Profit on sale of shares	(7500-5000)	2500
No of years (Jan ,2004 to Jan,2007)		3 years
At IRR,
P.V. of Cash inflow = P.V. of Cash Outflow
Let IRR be "x"
At IRR,
7500/(1+x)^3 = 5000
(1+x)^3 = 1.5
1+x = 1.5^(1/3)
1+x = 1.1447
x = 0.1447
x = 14.47%
Therefore the answer is Option-1)14.47%

.

Answer to Question-10:
Year	Cash Inflow	DF @ 6%	Present Value
0	11500000	1	11,500,000.00
1	3250000	0.943396	3,066,037.74
2	5250000	0.889996	4,672,481.31
3	5000000	0.839619	4,198,096.42
4	5000000	0.792094	3,960,468.32
			27,397,083.78
So the answer is Option-2 -    27,397,083.78

.

Answer to Question-11:

Banks calculate the monthly payment on a loan as as an annuity due with payment made at end of month.

So the answer is Option-4 : as an annuity due with payment made at end of month.

.

Answer to Question-12:

Amount required at the end of 12 years from now = $280000

FVIFA(12%,12) = 24.1331

Let the to be invested at the beginning of each year be $x

Therefore,

x*FVIFA(12%,12) = 280,000

x*24.1331 = 280,000

x = 11602.32

Therefore , the answer is Option-4 : $11602.32