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9. If the investor wishes to have $40,000 at the end of ten years, and plans to invest an
equal amount on December 31 of each year at 8% p.a., what will be the amount of
the annuity payment?
$_____________________
10. An investor intends to purchase, and to hold for an indefinite period of time, shares
of Mega Company preferred stock. The stock pays an $8 annual dividend. The
investor requires a 14% return on investment. How much will the investor be
willing to pay per share for Mega Company preferred stock?
$_____________________
ANSWER KEY
9. If the investor wishes to have $40,000 at the end of ten years, and plans to invest an
equal amount on December 31 of each year at 8% p.a., what will be the amount of
the annuity payment?
$2,761.18
Using a financial calculator:
FV = $40,000%
i = 8
N = 10
Compute PMT = $2,761.18
10. An investor intends to purchase, and to hold for an indefinite period of time, shares
of Mega Company preferred stock. The stock pays an $8 annual dividend. The
investor requires a 14% return on investment. How much will the investor be
willing to pay per share for Mega Company preferred stock?
$57.14
PVp = A x (1 / R)
PVp = $8 x (1 / 0.14)
PVp = $57.14