Answer: <em>(C.) $2,005</em>
Explanation:
Given :
Money Co. made a cash outflow of $194,000 for the $200,000 loan Money gave to Home Co.
The book value of the loan is $194,000.
The stated rate is 11%.
Hence they will receive an effective interest rate of 12.4% on cash outflow.
∴
Income from the loan = Book value × Effective interest rate × No. of months of the year
= $194,000 × 0.124 ×
= $2,004.67
Answer:
a)
$34.4
b)
$37.20
c) $59.57
Explanation:
Given:
Dividend paid = $2.15
Growth rate = 4% = 0.04
Required return = 10.5% = 0.105
Now,
a) Present value =
for the current price n = 1
thus,
Current price =
=
= $34.4
b) Price in 3 years
i.e n = 3
=
=
=
$37.20
c) Price in 15 years
i.e n = 15
=
=
= $59.57