Calculating Present Value of Lease Payments/Preferred Stock
Not what you're looking for?
Please help me understand these questions.
1. You bought a painting 10 years ago for $100,000. If you sold it for $310,600, what was your annual return on investment?
a) 8%
b) 10%
c) 12%
d) 14%
2. In an amortization schedule for a six-year loan with equal annual principal repayments
a) less than half of the loan would be repaid at the end of year three
b) the annual payment stays the same
c) amount of principal repaid decreases each year
d) the annual payments are higher in the earlier years
3. If Air Atlantic enters a 12-year lease with annual (end of year) payments of $500,000, what is the present value of the lease payments if the interest rate is 14%.
a) $ 2,830,000
b) $13,635,500
c) $ 6,000,000
d) $ 3,226,200
4. A preferred stock with a $100 par value pays an annual dividend at a rate of 2.6%. What is a share of this stock worth today if preferred stock with the same risk profile yields 11.75%?
a) $8.51
b) $20.00
c) $22.13
d) $28.80
e) $100.00.
Purchase this Solution
Solution Summary
This solution depicts the steps needed to estimate the annual rate of return, value of lease payments and worth of a preferred stock.
Solution Preview
1. You bought a painting 10 years ago for $100,000. If you sold it for $310,600, what was your annual return on investment?
Selling price=S=$310,000
Purchase price=P=$100,000
Number of years=n=10
Annual rate of return=(S/P)^(1/n)-1=(310000/100000)^(1/10)-1=11.98%
Correct option is c) 12%
2. In an amortization schedule for a six-year loan with equal annual principal repayments
a) less than half of ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking