Finance Problem
bondsp
finance_problems.pdf
How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is $1,600? . . A
. $218,080
. . B .
. $202,503
. . C .
. $186,926
. . D .
. $233,658
. . E .
. $249,235
. . F .
. $264,812
. Shady Rack Inc. has a bond outstanding with 9.75 percent coupon, paid semiannually, and 17 years to maturity. The market price of the bond is $1,042.43. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be the percent change in the market price of the bond? . . A
. . -17.09%
. . B .
. -16.39%
. . C .
. -17.76%
. . D .
. -14.01%
. . E .
. -15.66%
. . F .
. -14.87%
. Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7, and $10 for the years 8-10. Thereafter, starting in year 11, the company will pay a constant dividend of $5/year forever. If you require 12 percent rate of return on investments in this risk class, how much is this stock worth to you?
. . A .
. $37.77
. . B .
. $34.54
. . C .
. $50.50
. . D .
. $45.68
. . E .
. $41.46
. . F .
. $55.99
.
Your required rate of return is 15%. What is the net present value of a project with the following cash flows? . . Year . 0 . 1 . 2 . 3 . 4 . 5
. Cash Flow . -750 . 450 . 350 . 150 . 125 . -100
.
. . A. 26.33
. . . B
. . 72.15
. . C .
. 15.56
. . D .
. 60.27
. . E .
. 48.68
. . F .
. 37.37
. Please use the following information for this and the following two questions. BB Lean has identified two mutually exclusive projects with the following cash flows. . Year . 0 . 1 . 2 . 3 . 4 . 5
. Cash Flow Project A -52,000.00 . 18,000.00 . 17,000.00 . 15,000.00 . 12,000.00 . 9,000.00
. Cash Flow Project B -52,000.00 . 17,800.00 . 10,000.00 . 12,000.00 . 17,000.00
. 22,000.0 0
The company requires a 11.5% rate of return from projects of this risk. What is the NPV of project A?
. . A .
. 5,972.87
. . B .
. 417.37
. . C .
. 1,395.64
. . D .
. 1,624.90
. . E .
. 5,180.35
. . F .
. 972.57
. What is the IRR of project B?
. . A .
. 12.06%
. . B .
. 12.94%
. . C .
. 13.05%
. . D .
. 20.80%
. . E .
. 13.90%
. . F .
. 14.68%
. At what discount rate would you be indifferent between these two projects? . . A
. . 3.1177%
. . B .
. 34.1306%
. . C .
. 13.5250%
. . D .
. 26.0812%
. . E .
. 14.7386%
. . F .
. 15.8950%
. A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is $1,000. Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 9.5%. III. The bond’s current yield is 10%. . . A
. . I, II Only
. . B .
. I, III Only
. . C .
. I, II, and III
. . D .
. III Only
. . E .
. I Only
. . F .
. II, III Only
. Riverhawk Corporation has a bond outstanding with a market price of $1,250.00. The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%. What is the bond’s coupon rate? . . A
. . 13.61%
. . B .
. 11.31%
. . C .
. 9.77%
. . D .
. 10.54%
. . E .
. 12.08%
. . F .
. 12.84%
. You purchased a stock for $20 per share. The most recent dividend was $2.50 and dividends are expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock? . . A
. . 17.64%
. . B .
. 21.50%
. . C .
. 17.00%
. . D .
. 18.38%
. . E .
. 19.25%
. . F .
. 20.27%
. Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today? . . A
. . $22.80
. . B .
. $15.96
. . C .
. $20.52
. . D .
. $25.08
. . E .
. $18.24
. . F .
. $13.68
.
Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share. Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter. What is the current market value of the ASI’s stock if companies in this risk class have a 16% required rate of return? . . A
. . $56.03
. . B .
. $48.35
. . C .
. $51.29
. . D .
. $45.54
. . E .
. $54.27
. . F .
. $42.87
. The Retarded Company’s dividends are declining at an annual rate of 6 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock? . . A
. . $13.85
. . B .
. $19.20
. . C .
. $17.09
. . D .
. $15.33
. . E .
. $12.57
. . F .
. $21.78
. The dividend yield of a stock is 9 percent. If the market price of the stock is $18 per share and its dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by the company? . . A
. . $1.36
. . B .
. $1.53
. . C .
. $1.02
. . D .
. $1.70
. . E .
. $1.19
. . F .
. $0.85
.
Last year, Jen and Berry Inc. had sales of $45,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Twenty percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year? . . A
. . $12,667
. . B .
. $12,000
. . C .
. $10,636
. . D .
. $11,500
. . E .
. $14,250
. . F .
. $13,250
.
You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.75 percent and the inflation premium is 3 percent. US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form. . . A
. . 5.58%
. . B .
. 6.09%
. . C .
. 5.06%
. . D .
. 6.35%
. . E .
. 5.32%
. . F .
. 5.83%
. Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below. . . . Bond X . Bond Y
. Face value . $1,000 . $1,000
. Annual Coupon Payment . $120 . $130
. Payment Frequency . Semiannual . Annual
. Years to maturity . 15 . 15
. Price . $919.43 . ?
.
.
. What is the price of bond Y?
. . A .
. $925.88
. . B .
. $940.92
. . C .
. $1,007.15
. . D. $956.95
. . . E
. . $973.44
. . F .
. $989.75
.
