Question

Your investment account pays 8.2%, compounded annually. If you invest $5,000 today, how many years will it take for your investment to grow to $9,140.20?

Select the correct answer.

a. 9.15

b. 12.15

c. 7.65

d. 6.15

e. 10.65

One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 8% annual coupon bonds at their par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

Select the correct answer.

a. $1,235.04

b. $1,230.34

c. $1,237.39

d. $1,239.74

e. $1,232.69

Stewart Inc.'s latest EPS was $3.50, its book value per share was $22.75, it had 152,500 shares outstanding, and its debt-to-assets ratio was 46%. How much debt was outstanding?

Select the correct answer.

a. $2,956,668

b. $2,956,349

c. $2,955,712

d. $2,955,394

e. $2,956,031

Suppose you earned a $600,000 bonus this year and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years?

Select the correct answer.

a. $62,267.62

b. $62,275.12

c. $62,260.12

d. $62,252.62

e. $62,282.62

Answer 1

Q#1: Number of years = 7.65 as given below. The answer is option c.

Q#2: Current price of the bond = $1,239.74 (option d) as below:

Q#3:

Given, book value per share= $22.75, number of shares= 152,500.

Therefore, Equity (E)= 152,500*$22.75= $ 3,469,375

Also given, Debt to assets ratio = 46%

Total assets (A)= Debt + Equity =D+E

Equity represents 54% of total assets.    A*0.54= $ 3,469,375

Therefore, Debt (D)= ($ 3,469,375/0.54)*0.46 = $ 2,955,393.52 Rounded to $2,955,394 (Option d)

Q#4: Amount that can be withdrawn every year= $62,252.62 (Option d) as follows: