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12. What is the present value of a perpetuity of 100 per year? Assume interest rate is 10% and the first payment is made at end of the year. A. 1000 B. 1100 C. 1200 D. 1300 E. None of above

12. What is the present value of a perpetuity of 100 per year? Assume interest rate is 10% and the first payment is made at end of the year. A. 1000 B. 1100 C. 1200 D. 1300 E. None of above

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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### Finance Practice Questions #### Question 12 What is the present value of a perpetuity of $100 per year? Assume the interest rate is 10%, and the first payment is made at the end of the year. A. $1000 B. $1100 C. $1200 D. $1300 E. None of the above #### Question 13 How long does it take for money to triple at an Effective Annual Rate (EAR) of 10%? A. 11.53 years B. 12.53 years C. 13.53 years D. 14.53 years E. None of the above #### Question 14 Baruch, Inc. paid a dividend of $1 last year. The analyst expects the dividend to grow by 10% in each of the next three years, after which it will grow at a constant rate of 4% per year. The required return is estimated to be 9%. The dividend at year 4 (rounded to two decimals) is expected to be: A. $1.33 B. $1.36 C. $1.38 D. $1.40 E. None of the above #### Question 15 One year ago, an investor purchased a 10-year, $1000 par value, 6% semiannual coupon bond with a 6% yield to maturity. What is the purchasing price? A. $800 B. $900 C. $1200 D. $1300 E. None of the above
Transcribed Image Text:### Finance Practice Questions #### Question 12 What is the present value of a perpetuity of $100 per year? Assume the interest rate is 10%, and the first payment is made at the end of the year. A. $1000 B. $1100 C. $1200 D. $1300 E. None of the above #### Question 13 How long does it take for money to triple at an Effective Annual Rate (EAR) of 10%? A. 11.53 years B. 12.53 years C. 13.53 years D. 14.53 years E. None of the above #### Question 14 Baruch, Inc. paid a dividend of $1 last year. The analyst expects the dividend to grow by 10% in each of the next three years, after which it will grow at a constant rate of 4% per year. The required return is estimated to be 9%. The dividend at year 4 (rounded to two decimals) is expected to be: A. $1.33 B. $1.36 C. $1.38 D. $1.40 E. None of the above #### Question 15 One year ago, an investor purchased a 10-year, $1000 par value, 6% semiannual coupon bond with a 6% yield to maturity. What is the purchasing price? A. $800 B. $900 C. $1200 D. $1300 E. None of the above
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