Business Finance Math.

You are considering the purchase of an investment that would pay you $6,000 per year for Years 1-5, and $4,000 per year for Years 6-7. If you require an 8 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment?

Question 2

You are given the following cash flow information. The appropriate discount rate is 4 percent for years 1-4 and 4 percent for years 5-10. Payments are received at the end of the year.

Year Amount Interest Rate

1-4 $8,000 4%

5-10 $11,000 4%

What should you be willing to pay right now to receive the income stream above?

Question 4

A share of common stock has a current price of $85.68 and is expected to grow at a constant rate of 8 percent. If you require a 10 percent rate of return, what is the current dividend, Do, on this stock?

Question 6

Given the following probability distribution, what is the expected return and the standard deviation of returns for Security J?

State Pi Ri

1 40% 10%

2 25% 12%

3 35% 18%

Question 8

General Dynamics has a bond with 30 years to maturity has a face value of $1000. The bond pays a 5 percent semiannual coupon, and the bond has a 7 percent nominal yield to maturity. What is the price of the bond today?

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