Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $11.20 a
share. You have received dividend payments equal to $0.25 a share. Today, you sold all
of your shares for $8.60 a share. What is your total dollar return on this investment?
Which one of the following statements related to annuities and perpetuities is correct?
A. An ordinary annuity is worth more than an annuity due given equal annual cash
flows for ten years at 7 percent interest, compounded annually.
B. A perpetuity comprised of $100 monthly payments is worth more than an annuity
comprised of $100 monthly payments, given an interest rate of 12 percent, compounded
C. Most loans are a form of a perpetuity.
D. The present value of a perpetuity cannot be computed, but the future value can.
E. Perpetuities are finite but annuities are not.
Assigning discount rates to individual projects based on the risk level of each project:
A. may cause the firm's overall weighted average cost of capital to either increase or
decrease over time.
B. will prevent the firm's overall cost of capital from changing over time.
C. will cause the firm's overall cost of capital to decrease over time.
D. decreases the value of the firm over time.