# Ali Shah sets aside 2,000 each year for 5 years.

Ali Shah sets aside 2,000 each year for 5 years. He then withdraws the funds on an equal annual basis for the next 4 years. If Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use following two tables in this order:

a) present value of an annuity of $1; future value of an annuity of $1

b) future value of an annuity of $1; present value of an annuity of $1

c) future value of an annuity of $1; present value of a $1

d) future value of an annuity of $1; future value of a $1

Sharon Smith will receive $1 million in 50 years. The discount rate is 14. As an alternative, she can receive $2,000 today. Which should she choose?

a) the $1 million dollars in 50 years.

b) $2,000 today.

c) she should be indifferent.

d) need more information.

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Ali Shah sets aside 2,000 each year for 5 years. He then withdraws the funds on an equal annual basis for the next 4 years. If Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use ...

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This solution is comprised of a detailed explanation to answer if Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use following two tables in the following order.

The preferred stock of Gapers Inc. pays an annual dividend of $6.50. What is the price of the preferred stock if the required return is:

Question 1

The preferred stock of Gapers Inc. pays an annual dividend of $6.50. What is the price of the preferred stock if the required return is:

(a) 6%

(b) 8%

(c) 10%

Question 2

Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial needs after her retirement?

Question 3

Which of the following financial assets is likely to have the highest required rate of return based on risk?

a.corporate bond.

b.Treasury bill.

c.Certificate of Deposit.

d.common stock.

Question 4

Ali Shah sets aside 2,000 each year for 5 years. He then withdraws the funds on an equal annual basis for the next 4 years. If Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use following two tables in this order:

a.present value of an annuity of $1; future value of an annuity of $1

b.future value of an annuity of $1; present value of an annuity of $1

c.future value of an annuity of $1; present value of a $1

d.future value of an annuity of $1; future value of a $1

Question 5

Joe Nautilus has $120,000 and wants to retire. What return must his money earn so he may receive annual benefits of $20,000 for the next 14 years.

a.12%

b.Between 12% and 13%

c.14%

d.Greater than 15%

Question 6

As the discount rate becomes higher and higher, the present value of inflows approaches

a.0

b.minus infinity

c.plus infinity

d.need more information

Question 7

A 15-year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? Use annual analysis.

a.Over $1,000

b.Under $1,000

c.Over $1,200

d.Not enough information to tell.

Question 8

As the compounding rate becomes lower and lower, the future value of inflows approaches

a.0

b.the present value of the inflows

c.infinity

d.need more information

Question 9

You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

a.Present value of an annuity of $1

b.Future value of an annuity

c.Present value of $1

d.Future value of $1

Question 10

The dividend on preferred stock is most similar to:

a.common stock with no growth in dividends.

b.common stock with constant growth in dividends.

c.common stock with variable growth in dividends.

d.Certificate of Deposit.

Question 11

A 30-year zero-coupon bond that yields 12% percent is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?

a.$33

b.$83

c.$8333

d.$none of the above

Question 12

The risk premium is likely to be highest for

a.U.S. government bonds.

b.corporate bonds.

c.gold mining expedition.

d.either b or c