Finance 10 questions,

1. Bond valuation

Callaghan Motors' bonds have 7 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to maturity is 6%. What is the bond's current market price? Round your answer to the nearest cent.

2. Yield to maturity and future price

A bond has a $1,000 par value, 12 years to maturity, and a 8% annual coupon and sells for $980.

a. What is its yield to maturity (YTM)? Round your answer to two decimal places.    %

b. Assume that the yield to maturity remains constant for the next 5 years. What will the price be 5 years from today? Round your answer to the nearest cent. $   

3. Bond valuation

Nungesser Corporation's outstanding bonds have a $1,000 par value, a 8% semiannual coupon, 10 years to maturity, and an 10% YTM. What is the bond's price? Round your answer to the nearest cent.

$   

4. Yield to maturity

Heymann Company bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%.

a. What is the yield to maturity at a current market price of

1. $738? Round your answer to two decimal places.    %

2. $1,138? Round your answer to two decimal places.    %

b. Would you pay $738 for each bond if you thought that a "fair" market interest rate for such bonds was 14%-that is, if rd = 14%?

II. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

II. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.

II. You would buy the bond as long as the yield to maturity at this price equals your required rate of return.

II. You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

II. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond.

5. Price and yield

An 6% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 6.5859%.  What is the bond's price? Round your answer to the nearest cent. $    What is the bond's YTM? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answers to two decimal places.    %

6. Portfolio beta

An individual has $50,000 invested in a stock with a beta of 0.3 and another $60,000 invested in a stock with a beta of 2.1. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places.

7. Required rate of return

Assume that the risk-free rate is 5% and the expected return on the market is 8%. What is the required rate of return on a stock with a beta of 1.8? Round your answer to two decimal places.

8. Expected and required rates of return

Assume that the risk-free rate is 4.5% and the market risk premium is 3%.

a. What is the expected return for the overall stock market? Round your answer to two decimal places.  %

b. What is the required rate of return on a stock with a beta of 1.6? Round your answer to two decimal places.

9. Portfolio required return

Suppose you are the money manager of a $4.57 million investment fund. The fund consists of 4 stocks with the following investments and betas:

If the market's required rate of return is 8% and the risk-free rate is 5%, what is the fund's required rate of return? Round your answer to two decimal places.

10. Required rate of return

Stock R has a beta of 2.1, Stock S has a beta of 0.65, the expected rate of return on an average stock is 9%, and the risk-free rate of return is 5%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.

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