22. A financial analyst tells you that investing in stocks will allow you to dou

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22. A financial analyst tells you that investing in stocks will allow you to double your money in 7 years. What annual rate of return is the analyst assuming you can earn? AJ& 76% B) 9.87% C) 10.01% D) 10.41% 23. A generous benefactor to the local ballet plans to make a one-time endowment which would provide the ballet with $150,000 per year into perpetuity. The rate of interest is expected to be 5 percent for all future time periods. How large must the endowment be? (a) $ 300,000 (b) $3,000,000 (c) $ 750,000 (d) $1,428,571 24. A firm has an issue of $1,000 par value bonds with a 12 percent stated coupon rate outstanding. The issue pays coupon annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for (a) $1,000 (b) $805.20 (c) $851.50 (d) $1,268.20 today. 25. A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12 percent on similar risk involvements. The value of the firm's common stock is (a) $22.50/share (b) $9/share (c) $90/share (d) $30/share 26. The risk-free rate is 7 percent annually, and the market return is 12 percent annually. The stock is expected to generate a constant dividend of $6.70 per share. A pending lawsuit has just been dismissed and the beta of the stock drops to 1.4. The new equilibrium price of the stock (a) will be $55.83. (b) will be $43.23. (c) will be $47.86. (d) cannot be determined from the information given. 27. A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 16 percent. The value of the preferred stock is (a) $64 (b) $16 (c) $2 (d) $50

Explanation / Answer

22 option "D 10.41%" is correct 23 option "B 3,000,000" is correct 24 option "D 1268.20" is correct 25 option "c $90 per share" is correct 26 option "a will be $55.83" is correct 27 option "c $25 " is correct

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