Question

The preferred stock of General Motors pays a dividend of $2 every quarter. The appropriate discount rate is 8% per quarter.

If you expect to receive the $2 every quarter for exactly 6 years and nothing thereafter, what is the present value of those cash flows?

In order to save for your retirement, you want to save $2,000 every year for 35 years, starting one year from now. The annual interest rate on your savings account is 2%.

How much money will you have in your account in 35 years?

You took out a student loan in college and now have to pay $1,100 every year for 20 years, starting one year from now. The annual interest rate on the loan is 5%.

What is the present value of the 20 yearly payments?

You want to buy a house financed with a 30-year fixed-rate mortgage. The best monthly interest rate you could find is 0.2%.

What is the most you can borrow if you can only afford to pay $1,800 per month?

Answer 1