Multiple choice

 1. A corporate bond pays 8.5 percent interest. You are in the 15 percent tax bracket. What is your after-tax yield on this bond? 

Answer 

1.28 percent

2.23 percent

7.23 percent

8.35 percent

9.78 percent

2. Blackwell Ink is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 5 percent annually. What is a share of this stock worth today at a required return of 15 percent?

Answer 

$4.07

$4.28

$4.49

$4.72

3. The 7 percent annual coupon bonds of TPO, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in 6.5 years. What is the yield to maturity? 

Answer 

6.42 percent

6.59 percent

6.63 percent

6.68 percent

6.70 percent

4. Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all future dividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return? 

Answer 

$12.56

$12.95

$13.31

$13.68

$14.0731