Mack Industries just paid a dividend of $1.00 per share (i.e., D0 = $1.00). Analysts expect the company’s dividend to grow 20 percent this year (i.e., D1 = $1.20), and 15 percent next year. After two years the dividend is expected to grow at a constant rate of 5 percent. The required rate of return on the company’s stock is 12 percent. What should be the current price of the company’s stock?

If interest rates fall after a bond issue, the bond’s price will _____.  This change will be more noticeable for _________ bonds.

What is the beta of a portfolio which invests 70% of your money in Treasury Bills and the rest of your money in S&P500 index funds? Note: S&P 500 index fund is similar to market portfolio.

Mary recently received a credit card with a nominal interest rate of 19 percent.  With the card, she purchased some new clothes for $350.  The minimum payment on the card is only $10 per month.  If Mary makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock’s current price?

Your client is 35 years old, and she wants to begin saving for retirement, with the first payment to come one year from now.  She can save $8,000 per year, and you advise her to invest it in securities which you expect to provide an average annual return of 6 percent.  If she follows your advice, how much money would she have at age 70?

Susan recently received a credit card with a nominal interest rate of 21 percent.  With the card, she purchased some new clothes for $400.  The minimum payment on the card is only $15 per month.  If Susan makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

What is the present value of an annuity due that pays $2,000 per year for 4 years, assuming the annual discount rate is 7 percent?

You put 45% of your money in a stock that has an expected return of 14%. You put the rest of you money in a bond that has an expected return of 6%. What is the expected return of your portfolio?

Your uncle has $375,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 7.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account?