Question

YOU MUST SHOW ALL WORK (CALCUATIONS) AND DRAW TIME LINES. WRITE WITH THE CORRECT FORMULA TO BE USED

1) Jane is 25 years old and was able to save $25,000.    After doing some research, she identifies a stock called HPG Industries that has a dividend yield of 7% that has been consistent for the past 10 years. Based on this information, she decides to invest in this stock. Considering that HPG Industries pays the dividend consistently, how many years will it take for Jane to double her money?

2) For college graduation, Jose’s dad gives him $15,000 toward a car.   Jose thinks it through: With 10K he could probably buy a decent used car, but has his eyes on a Ford F150 pick-up truck that he’s wanted that he could buy for about $35,000. He decides to save the money and wait. He invests the $15,000 in a high risk bond that pays 12% interest per year and matures in 8 years.   Does Jose have enough money for the truck in 8 years?   Show all work.

Answer 1

Question 1

1 Year	2 Value at the Starting of Year Year	3 Dividend Yield @ 7%	4 (2 + 3) Value at the End of Year
1	25000	1750	26750
2	26750	1750	28500
3	28500	1750	30250
4	30250	1750	32000
5	32000	1750	33750
6	33750	1750	35500
7	35500	1750	37250
8	37250	1750	39000
9	39000	1750	40750
10	40750	1750	42500
11	42500	1750	44250
12	44250	1750	46000
13	46000	1750	47750
14	47750	1750	49500
15	49500	1750	51250

It will require 15 Years to double the amount.

Question 2

1 Year	2 Value at the Starting of Year Year	3 Interest Earned @ 12%	4 (2 + 3) Value at the End of Year
1	15000	1800	16800
2	16800	1800	18600
3	18600	1800	20400
4	20400	1800	22200
5	22200	1800	24000
6	24000	1800	25800
7	25800	1800	27600
8	27600	1800	29400

Jose will be unable to buy as after 8 years, the value will be $29400 and cost of Ford F150 pick-up truck is $35000, so he will be short by $5600.