1. Today, your grandmother gave you a gift of $25,000 to help pay for your college education. She told you that this amount was the result of a one-time investment at 8 percent interest 15 years ago. How much did your grandmother originally invest?

2. You are comparing two annuities with equal present values. The applicable discount rate is 4.8 percent. One annuity pays $2,000 each month for 10 years at the end of each month. How much does the second annuity pay each quarter for 10 years at the end of each quarter?

3. Mari Ann is a beautician who currently leases her shop. She would like to buy her own building as she feels that it could be an investment which would provide a retirement income for her several years from now. To achieve this goal, Mari Ann has decided to save $1,000 a month, at the beginning of each month, for the next 10 years. She expects to earn 6.0 percent, compounded monthly, on her savings. How much will she have saved by the end of the 10 years that she can use to buy a building?

4. You are paying an effective annual rate of 19.99 percent on your credit card. The interest is compounded daily. What is the annual percentage rate on your account?

5. The 2018 ABC passenger car is priced at MSRP of $59,000. You and the sales person negotiated the price and reached an agreement at $54,000. You would like to trade in your existing SUV which has the market value of $14,000. You’d like to finance the amount after trade-in from your local bank offering you a 6.0 percent interest for 4-year car loan. Your monthly loan payment starts at the beginning of each month. What is the monthly payment for your car loan?

6. It is June 29, 2018 and you have just begun work with XYZ Financial Services. A client has seen the following price information about corporate bonds in the Wall Street Journal and has asked:

Symbol
Coupon, Maturity, Last Change, Yield%
AMR, 7.00, 12/29/2037, 62.6273, -0.12, ?????

Note that the AMR bond pays coupons semiannually.
a. Supply the missing information (?????) for AMR bond.
b. (What is the current yield for the bond?
c. What is the expected one-year capital gains yield for the bond?
d. What was yesterday’s price of the bond?

7. Hamilton Company's dividend is expected to grow at 15% for the next 3 years and then at 5% forever. The company has just paid a dividend of $4 and the required rate of return is 10%.
a. (10 points) What is the current price of the stock?
b. (5 points) What is the expected price two years from today?
c. (5 points) What is the expected price 15 years from today?

8. The Lin Company's bonds with a $1,000 face value and 12 years to maturity are selling in the market for $1,362.39. If comparable bonds yield 9%, what is the coupon rate on the Lin Company's bonds that pay coupons semiannually?

9. Suppose that today you buy a 6% annual coupon bond for $849.27. The bond has 12 years to maturity.
a. What rate of return do you expect to earn on your investment?
b. Seven years from now, the YTM on your bond is expected to rise by 2%, and you plan to sell. What is the expected holding period yield (HPY) on your investment? Note that if you sell the bond before it matures, your realized return is called the HPY.

1. Today, your grandmother gave you a gift of $25,000 to help pay f...