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Homework answers / question archive / University of New Haven FINC 2213 Quiz 2 (chap 5) 1)A company's 2016 sales were $75 million

- Suppose a U.S. government bond promises to pay $3,125 three years from now. If the going interest rate on 3- year government bonds is 4.25%, how much is the bond worth today?

- Sims Inc. earned $1.25 per share in 2000. Five years later, in 2005, it earned $2.31. What was the growth rate in Sims' earnings per share (EPS) over the 5-year period?

- Addico Corp's 2005 earnings per share were $2.37, and its growth rate during the prior 5 years was 8.56% per year. If that growth rate were maintained, how long would it take for Addico's EPS to double?

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- You just won the state lottery. The state gives you the choice of $1,000,000 today or a 20-year annuity of

$80,000, with the first payment coming one year from today. What rate of return is built into the annuity?

- An investment promises the following cash flow stream: $1,000 at Time 0; $2,500 at the end of Year 1 (or at T=1); $3,500 at the end of Year 2; and $4,000 at the end of Year 3. At a discount rate of 6%, what is the present value of the cash flow stream?

- Credit card issuers must by law print their Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 17%, with interest paid monthly, what is the EFF% on the card?

- If a bank pays a 4% nominal rate, with monthly compounding, on deposits, what effective annual rate does the bank pay?

- In 1958 the average tuition for one year at an Ivy League school was $1,800. Thirty years later, in 1988, the average cost was $13,700.

What was the growth rate in tuition over the 30-year period?

- At an inflation rate of 9%, the purchasing power of $1 would be cut in half in 8.04 years. How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4%?

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