FIN 534 Week 5 Midterm Exam Part 2

· Question 1

2 out of 2 points

Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

· Question 2

2 out of 2 points

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT?

· Question 3

2 out of 2 points

Which of the following statements regarding a 20-year (240-month) $225,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)

· Question 4

2 out of 2 points

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment?

· Question 5

2 out of 2 points

You are considering two equally risky annuities, each of which pays $25,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?

· Question 6

2 out of 2 points

A $150,000 loan is to be amortized over 6 years, with annual end-of-year payments. Which of these statements is CORRECT?

· Question 7

2 out of 2 points

Nicholas Industries can issue a 20-year bond with a 6% annual coupon. This bond is not convertible, is not callable, and has no sinking fund. Alternatively, Nicholas could issue a 20-year bond that is convertible into common equity, may be called, and has a sinking fund. Which of the following most accurately describes the coupon rate that Nicholas would have to pay on the convertible, callable bond?

· Question 8

2 out of 2 points

A Treasury bond has an 8% annual coupon and a 7.5% yield to maturity. Which of the following statements is CORRECT?

· Question 9

2 out of 2 points

Which of the following statements is CORRECT?

· Question 10

2 out of 2 points

Bonds A and B are 15-year, $1,000 face value bonds. Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, which is expected to remain constant for the next 15 years. Which of the following statements is CORRECT?

· Question 11

2 out of 2 points

Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?

· Question 12

2 out of 2 points

Which of the following statements is CORRECT?

· Question 13

2 out of 2 points

A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT?

· Question 14

2 out of 2 points

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.)

· Question 15

2 out of 2 points

Which of the following statements is CORRECT?

· Question 16

2 out of 2 points

Which of the following statements is CORRECT?

· Question 17

2 out of 2 points

Assume that the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECT?

· Question 18

2 out of 2 points

If markets are in equilibrium, which of the following conditions will exist?

· Question 19

2 out of 2 points

Which of the following statements is CORRECT?

· Question 20

2 out of 2 points

Which of the following statements is CORRECT?

· Question 21

2 out of 2 points

Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

· Question 22

2 out of 2 points

Which of the following statements is NOT CORRECT?

· Question 23

2 out of 2 points

If a firm's expected growth rate increased then its required rate of return would

· Question 24

2 out of 2 points

Which of the following statements is CORRECT, assuming stocks are in equilibrium?

· Question 25

2 out of 2 points

Which of the following statements is CORRECT?

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