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1) JIT has a $1,000 par value, 30-year bond outstanding that was issued 20 years ago at an annual coupon rate of 10%, paid semiannually. Market interest rates on similar bonds are 7%. Calculate the bond’s price.
a. $956.42 b. $1,000.00 c. $1,168.31 d. $1,213.19
2) What is the yield to maturity of a nine-year bond that pays a coupon rate of 20% per year, has a $1,000 par value, and is currently priced at $1,407? Round your answer to the nearest whole percent and assume annual coupon payments.
a. 5% b. 14% c. 12% d. 11%
3) Montford Company bonds have a 14% coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 10 years from now. Compute the value of Montford bonds if investors’ required rate of return is 12%.
a. $1,114.70 b. $1,149.39 c. $894.06 d. $1,000.00
4) You are considering the purchase of Boco bonds that were issued 14 years ago. When the bonds were originally sold, they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually. The bond is currently selling for $1,508.72. What is the yield to maturity on the bonds?
a. 8.50% b. 14.38% c. 11.11% d. 7.67%
5) Delta Corp. preferred stock pays $3.15. What is the value of the stock if your required rate of return is 8.5% (round your answer to the nearest $1, and assume no transaction costs)?
a. $33 b. $23 c. $27 d. $37
6) Touch High Co. just paid a dividend of $1.65 on its common stock. This company’s dividends are expected to grow at a constant rate of 3% indefinitely. If the required rate of return on this stock is 11%, compute the current value of per share of TH stock.
a. $20.63 b. $21.24 c. $15.00 d. $55.00
7) Little Rock stock is currently selling for $42.86. It is expected to pay a dividend of $3.00 at the end of the year. Dividends are expected to grow at a constant rate of 3% indefinitely. Compute the required rate of return on LR stock.
a. 10% b. 33% c. 7% d. 4.3%
8) What is the expected rate of return for an investment that has the following expected scenario? If there is an 18% probability of a recession, 2.0% return; if there is a 65% probability of a moderate economy, 9.5% return; if there is a 17% probability of a strong economy, 14.2% return.
a. 11.25% b. 7.33% c. 8.95% d. 9.59%
9) You hold a portfolio with the following securities: Percent Security of Portfolio Beta Return X Corporation 20% 1.35 14% Y Corporation 35% .95 10% Z Corporation 45% .75 8% Compute the expected return and beta for the portfolio.
a. 10.67%, 1.02 b. 9.9%, 1.02 c. 34.4%, .94 d. 9.9%, .94
10) Use the following information, which describes the possible outcomes from investing in a particular asset, to answer the following questions State of the Economy Probability of the States Percentage Returns Economic recession 25% 5% Moderate economic growth 55% 10% Strong economic growth 20% 13% The expected return from investing in the asset is:
a. 9.00%. b. 9.35%. c. 10.00%. d. 10.55%.
The standard deviation of returns is:
a. 8.00%. b. 7.63%. c. 4.68%. d. 2.76%.