1. You invested in a savings account that has an annual interest rate of 10.4 percent. The account credits interest daily. What is the Effective Annual Rate (EAR) of this account? (Show your answer in decimal form to four places, so if you got 12.34%, enter 0.1234 as the answer)

2. Ted wants to purchase some outstanding shares of preferred stock that promise an annual payment of $5.05 forever. Assuming Ted requires an investment return of 12.9 percent on similar investments, what is the most he should be willing to pay per share?

3. An investment opportunity generates cash flows in years 1, 2, 3 and 4 of $2,492, $3,178, $4,759, and $7,110 respectively. Using a discount rate of 9.9%, what is the present value of this set of cash flows (to the nearest dollar)?

4. Assuming a discount rate of 6.6 percent, what is the present value of the following stream of uneven cash flows over the next 10 years?

Year 1 | $26,728 |

Year 2 | $19,363 |

Year 3 | $11,392 |

Year 4 | $17,496 |

Year 5 | $11,100 |

Year 6 | $12,041 |

Year 7 | $10,304 |

Year 8 | $27,646 |

Year 9 | $26,151 |

Year 10 | $16,536 |

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