ABC Company offers a perpetuity which pays annual payments of $9,478. This contract sells for $276,415 today. What is the interest rate?

1. ABC Company offers a perpetuity which pays annual payments of $9,478. This contract sells for $276,415 today. What is the interest rate?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 2

1. Consider a taxable bond with a yield of 11.9% and a tax-exempt municipal bond with a yield of 5.9%. At what tax rate would you be indifferent between the two bonds?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 3

1. What is the effective rate of 15.28% compounded quarterly?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 4

1. The present value of a 11-year annuity is $200,958. If the interest rate is 10% and payments are made at the end of each period, what is the amount of each payment? Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

1 points  

Question 5

1. A project has the following cash flows. What is the internal rate of return?

    Year                     0              1                2              3       

 Cash flow     -$121,000      68,150     $42,200      $39,100

1 points  

Question 6

1. If the coupon rate is greater than the yield to maturity, the bond will:

1 points  

Question 7

1. The common stock of ABC Industries is valued at $41.1 a share. The company increases their dividend by 4.5 percent annually and expects their next dividend to be $1.53. What is the required rate of return on this stock?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 8

1. A stock just paid a dividend of D0 = $1.2.  The required rate of return is rs = 19.9%, and the constant growth rate is g = 3.8%.  What is the current stock price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points  

Question 9

1. Standard deviation measures:

1 points  

Question 10

1. You have a portfolio of two risky stocks which turns out to have no diversification benefit. The reason you have no diversification is the returns:

1 points  

Question 11

1. If the market value of debt is $128,853, market value of preferred stock is $125,479, and market value of common equity is 161,266, what is the weight of preferred stock?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 12

1. A bond that sells for less than face value is called as:

1 points  

Question 13

1. The ABC Company has a cost of equity of 12.6 percent, a pre-tax cost of debt of 5.3 percent, and a tax rate of 38 percent. What is the firm’s weighted average cost of capital if the weight of debt is 67 percent?

Note: Enter your answer in precentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 14

1. ABC Company's last dividend was $3.1.  The dividend growth rate is expected to be constant at 8% for 3 years, after which dividends are expected to grow at a rate of 3% forever.  The firm's required return (rs) is 15%.  What is its current stock price (i.e. solve for Po)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points  

Question 15

1. ABC company’s market value of common stock is $200 million, preferred stock is $300 million, and debt is $500 million. Suppose that the cost of equity is 7%, the before-tax cost of debt is 4.8%, cost of preferred stock is 5%, and the tax rate is 25%.

Compute the WACC.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points  

Question 16

1. The principal amount of a bond that is repaid at the end of term is called the par value or the:

1 points  

Question 17

1. You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.49. What does the beta of the second stock have to be if you want the portfolio to have a beta of 0.66?

Enter your answer rounded off to two decimal points.

1 points  

Question 18

1. Based on the following data, calculate the returns for June 2014

Enter your answer in percentages rounded off to two decimal points.

1 points  

Question 19

1. ABC, Inc. has 4 percent bonds outstanding that mature in 25 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $900 each. What is the firm's after-tax cost of debt if the tax rate is 25%? 

Enter your answer as a percentage rounded off to two decimal points.

1 points  

Question 20

1. An investor puts $25,000 in a risk-free asset and $50,000 in the market portfolio. Compute the beta of his portfolio.