9. The common stock of Marc Company is selling for $32.84. Dividend paid last pe

Question

9. The common stock of Marc Company is selling for $32.84. Dividend paid last period was $2.94/share and has growth rate of 9.5%. If you purchase the common stock at the market what is the expected rate of return? A. 9.0% B. 9.8% C. 19.3% D. 18.45% 10. Bill plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years, If Bill can earn 12 percent on his contributions, how much will he have at the end of twentieth year? A) $19,292 B) $14,938 C) $40,000 D) $144,104

Explanation / Answer

Question 9. Selling price 32.84 Last Dividend Paid 2.94 Growth Rate 9.50% Next Dividend Receivable 3.2193 Expected Return 9.80% (3.2193/32.84) Answer B. Formula for Retirement plan is A=P x (a^n-1)/(a-1) here P=2000, a=1+12/100 = 1.12 and n=20 years Hence A = 2000 x (1.12^20-1)/(1.12-1) Therefore A = 122104.9 or 144104 Answer D.

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