1.

If interest rates are greater than zero, the future value of an annuity factor will
always be greater than what value?
2. If interest rates are greater than zero, a present value of an annuity factor will
always be less than what value?
3. You are promised five payments of $2,000 each at the end of each of the next five
years. If interest rates are 8% per year, what is the value of this payment stream?
4. You are promised five payments of $2,000 per year to commence at the end of
three years from now. Thereafter, payments occur at subsequent year-ends. What
is the value of this payment stream? r = 8% still.
5. What will the payment stream in question 4 amount to if invested until the end of
year 10?
6. The company dividend you just received was $ $23.75. It is expected to grow at a
rate of 3% per year for the foreseeable future. What is the value of a share using
the dividend growth model assuming the appropriate discount rate is 11% per
year?
7. Using the results in question 6, if there are 325,000 common shares outstanding,
what is the value of the company?
8. You are planning to invest in a company whose common shares will pay a
dividend of $25 at the end of this year, $35 at the end of the next year, and $55 as
the end of the year after that, after which the dividend is expected to grow at rate
of 4% per year for the foreseeable future. What is the value of a share if the
appropriate discount rate is 14%?
9. You are offered an annuity that pays $100 at the end of next, year, $200 the next
year, $300 the year after that and so on increasing $100 per year in perpetuity. If
the appropriate discount rate is 10% what is the value of the annuity?
10. You need $100,000 at the end of year 10. If the interest rate is 5% how much
would you have to put away each year starting at the end of the current year?
11. If you want to double your money in 5 years, what interest rate do you need?
12. If the rate is 11% and you are investing today, how many years does it take to
double your money.
13. If you are quoted a rate of 12% compounded quarterly, what is the EAR?
14. If you are quoted an EAR of 13% and compounding is semi-annual, what is the
period rate? What is the APR?
15. If you are quoted a period rate of 3% and an EAR of 30.477%, what is the
compounding frequency?

You may also want to try questions 7, 8, 9, 16, 17 and 18 from chapter 5.