# Easy finance questions. Please show your work so I understand how you arrived at your answer and if its easier to respond in word doc feel free to do… 1

Easy finance questions. Please show your work so I understand how you arrived at your answer and if its easier to respond in word doc feel free to do so.

14. Mrs. Brown is considering setting up a college fund for her grandson. Mrs. Brown wants to pay her grandson’s tuition fees of \$5,000 each year for four years. Assume that she saves an equal amount each year, and the first deposit is made one year from now. Interest rates will remain constant at 8 percent.

How much must Mrs. Brown save each year? Assume her grandson will go to college in 18 years and tuition fees are paid once a year at the beginning of the year.

15. Lincoln and Donovan’s will pay a dividend of \$5 per share in year 1. It sells at \$60 a share, and firms in the same industry provide an expected rate of return of 14 percent. What must be the expected growth rate of the company’s dividend?

16. Show numerically that investment horizon has no bearing on current stock price. For your illustration assume investment horizons of three versus five years and the following facts: the stock is correctly priced at \$40.00, has a required return of 17 percent, a growth rate of 7 percent, and has just paid a \$3.74 dividend.

17. Lincoln wants to buy a new Mercedes-Benz Jeep. He will need to borrow \$20,000 to go with his down payment in order to afford this car. If car loans are available at a 6 percent annual interest rate, what will Lincoln’s monthly payment be on a four-year loan?

18. Determine the current yield, yield to maturity, and price of the following bond as of the date of purchase and on each anniversary date of its purchase until maturity: three-year bond with a 12 percent coupon and a purchase price of \$1,100.

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