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Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
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Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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# Gina Dare, who wants to be a millionaire, plans to retire at

### Customer Question

Gina Dare, who wants to be a millionaire, plans to retire at the end of 40 years. Gina’s plan is to invest her money by depositing into an IRA at the end of every year. What is the amount that she needs to deposit annually in order to accumulate \$1,000,000? Assume that the account will earn an annual rate of 11.5%. Round off to the nearest \$1.
a. \$1,497
b. \$5,281
c. \$75
d. \$3,622

2. If you want to have \$1,200 in 27 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded monthly (round to the nearest \$10).
a. \$910
b. \$890
c. \$880
d. \$840

3. Three years from now, Barbara Waters will purchase a laptop computer that will cost \$2,250. Assume that Barbara can earn 4.25% (compounded quarterly) on her money. How much should she set aside today for the purchase? Round off to the nearest \$1.
a. \$1,250
b. \$900
c. \$1,866
d. \$1,982

4. Caldwell, Inc. sold an issue of 30-year, \$1,000 par value bonds to the public. The bonds carry a 13.85% coupon rate and pay interest semiannually. It is now 12 years later. The current market rate of interest on the Caldwell bonds is 8.45%. What is the current market price (intrinsic value) of the bonds? Round off to the nearest \$1.
a. \$751
b. \$1,494
c. \$1,220
d. \$976

5. MI has a \$1,000 par value, 30-year bond outstanding that was issued 20 years ago at an annual coupon rate of 10%, paid semiannually. Market interest rates on similar bonds are 7%. Calculate the bond’s price.
a. \$956.42
b. \$1,000.00
c. \$1,168.31
d. \$1,213.19

6. What is the yield to maturity of a nine-year bond that pays a coupon rate of 20% per year, has a \$1,000 par value, and is currently priced at \$1,607? Round your answer to the nearest whole percent and assume annual coupon payments.
a. 5%
b. 14%
c. 12%
d. 9.6%

7. The XYZ Company, whose common stock is currently selling for \$50 per share, is expected to pay a \$2.00 dividend in the coming year. If investors believe that the expected rate of return on XYZ is 14%, what growth rate in dividends must be expected?
a. 5%
b. 14%
c. 10%
d. 6%

8. Green Company’s common stock is currently selling at \$24.00 per share. The company recently paid dividends of \$1.92 per share and projects growth at a rate of 4%. At this rate, what is the stock’s expected rate of return?
a. 4.08%
b. 8.00%
c. 12.00%
d. 8.80%

9. McMillen House of Books recently paid a \$3 dividend on its preferred stock. Investors require a 6% return on the stock. The stock is currently selling for \$45. Is the stock a good buy? (Show work!)
a. Yes, as it is undervalued \$5.
b. Yes, as it is undervalued \$10.
c. No, as it is overvalued \$5.
d. No, as it is overvalued \$10.

10.. Style Corp. preferred stock pays \$3.15. What is the value of the stock if your required rate of return is 7.5% (round your answer to the nearest \$1, and assume no transaction costs)?
a. \$33
b. \$23
c. \$42
d. \$37
Submitted: 6 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 6 years ago.

Dear Friend,

I am highlighting the answer from the options,

Gina Dare, who wants to be a millionaire, plans to retire at the end of 40 years. Gina's plan is to invest her money by depositing into an IRA at the end of every year. What is the amount that she needs to deposit annually in order to accumulate \$1,000,000? Assume that the account will earn an annual rate of 11.5%. Round off to the nearest \$1.
a. \$1,497
b. \$5,281
c. \$75
d. \$3,622

2. If you want to have \$1,200 in 27 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded monthly (round to the nearest \$10).
a. \$910
b. \$890
c. \$880
d. \$840

3. Three years from now, Barbara Waters will purchase a laptop computer that will cost \$2,250. Assume that Barbara can earn 4.25% (compounded quarterly) on her money. How much should she set aside today for the purchase? Round off to the nearest \$1.
a. \$1,250
b. \$900
c. \$1,866
d. \$1,982

4. Caldwell, Inc. sold an issue of 30-year, \$1,000 par value bonds to the public. The bonds carry a 13.85% coupon rate and pay interest semiannually. It is now 12 years later. The current market rate of interest on the Caldwell bonds is 8.45%. What is the current market price (intrinsic value) of the bonds? Round off to the nearest \$1.
a. \$751
b. \$1,494
c. \$1,220
d. \$976

5. MI has a \$1,000 par value, 30-year bond outstanding that was issued 20 years ago at an annual coupon rate of 10%, paid semiannually. Market interest rates on similar bonds are 7%. Calculate the bond's price.
a. \$956.42
b. \$1,000.00
c. \$1,168.31
d. \$1,213.19

6. What is the yield to maturity of a nine-year bond that pays a coupon rate of 20% per year, has a \$1,000 par value, and is currently priced at \$1,607? Round your answer to the nearest whole percent and assume annual coupon payments.
a. 5%
b. 14%
c. 12%
d. 9.6%

The XYZ Company, whose common stock is currently selling for \$50 per share, is expected to pay a \$2.00 dividend in the coming year. If investors believe that the expected rate of return on XYZ is 14%, what growth rate in dividends must be expected?
a. 5%
b. 14%
c 10%
d. 6%

8. Green Company's common stock is currently selling at \$24.00 per share. The company recently paid dividends of \$1.92 per share and projects growth at a rate of 4%. At this rate, what is the stock's expected rate of return?
a. 4.08%
b. 8.00%
c. 12.00%
d. 8.80%

9. McMillen House of Books recently paid a \$3 dividend on its preferred stock. Investors require a 6% return on the stock. The stock is currently selling for \$45. Is the stock a good buy? (Show work!)
a. Yes, as it is undervalued \$5.
b. Yes, as it is undervalued \$10.
c. No, as it is overvalued \$5.
d. No, as it is overvalued \$10.

10.. Style Corp. preferred stock pays \$3.15. What is the value of the stock if your required rate of return is 7.5% (round your answer to the nearest \$1, and assume no transaction costs)?
a. \$33
b. \$23
c. \$42
d. \$37

I am sure the above shall help...

Warm Regards,

Customer: replied 6 years ago.
I neede to show my work as to how we got to the answer...not just the answers. That is why I paid more for more details.
Expert:  Rakhi Vasavada replied 6 years ago.

Dear Friend,

In that case, I will have to opt out. Because, we work it out in excel and other automated worksheets.

Hope to assist you in future....

Warm Regards,

Customer: replied 6 years ago.

If it is worked out in excel can you send me that? The is exactly what is being requested from me by the prof. It shows how we got to the answer.

Janie

Expert:  Rakhi Vasavada replied 6 years ago.

Dear Friend,

I have no problems with that but it is an proprietary sheet and our company prohibits its use outside.

Regards,