b. Modify the firm’ s investment plan to help shareholders achieve a particular time pattern of consumption.
c. Choose high- or low-risk assets to match shareholders’ risk preferences.
d. Help balance shareholders’ checkbooks.
But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
2-9
A. The cost of an automobile is $ 10,000. If the interest rate is 5 %, how much would you have to set aside now to provide this sum in five years?
B. You have to pay $ 12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8 %, how much do you set aside today to cover these bills?
C. You have invested $ 60,476 at 8 %. After paying the above school fees, how much would you remain at the end of six years?
2-12
What is the PV of $ 100 received in:
A. Year 10( at a discount rate of 1 %)
B. Year 10( at a discount rate of 13 %)