FIN 419 Final exam latest/FIN 419 Final exam latest

FIN 419 Final exam latest




1. You want to invest in a stock that pays $6.00 annual cash dividends for the next five years.

At the end of the five years you will sell the stock for $30.00. If you want to earn 10% on this

investment what is a fair price for this stock if you buy it today?

$22.75

$40.37

$18.63

$41.37

today's price (P) = (future price × PVF) + (dividend stream × PVAF)

= ($30 × 0.620921) + ($6 × 3.790787) = $18.628 + $22.745 = $41.372 or about

$41.37.

2. ________ provides financial advice helps design bond terms makes sure that new bonds

meet listing requirements and then markets new bond issues.

An investment banker

The Federal Reserve

A stock broker

The Securities and Exchange Commission

3. An investment of $100 today is worth $116.64 at the end of two years if it earns an annual

interest rate of 8%. How much interest is earned in the first year and how much in the second

year of this investment?

The interest earned in year one is $8.64 and the interest earned in year two is $8.00.

There is not enough information to solve this problem.