ch.6 principles of fin
How much would you have to pay for a U.S. Government bond ($1,000 maturity value) scheduled to mature in February 2020 and quoted at 118:07 "bid" and 118:15 "asked"?
$1,184.69
Assume that the dividend on Central Power Company's $3.25 preferred stock issue is paid annually at the end of the year. Determine the value of this preferred stock to an investor who requires a 12 percent rate of return.
$27.08
The State of New York issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5%. Determine the value of these bonds today to an investor who requires a 10% return on his investment.
$50
What is the value of a $1,000 par value Consul perpetual bond with a 6 percent coupon rate if the required rate of return is 9 percent?
$666.67
Baywa has an outstanding bond that has a coupon rate of 8.3%. What is the market price of this bond if it pays interest semiannually, has 15 years to maturity, and the current required rate of return is 9% on bonds of similar quality?
$943
What is the required rate of return to the investor who is willing to purchase a Duke Power preferred stock with a $8.70 dividend, a par value of $100, and a current market price of $87?
10.0%
Determine the yield to maturity to the nearest tenth of 1 percent of a zero coupon bond with 8 years to maturity that is currently selling for $404.
12.0%
The call feature of a long-term bond ________. a. states the call price b. is an optional retirement provision c. allows the issuer to replace a high coupon bond with a lower coupon bond d. all of these choices are correct
all of these choices are correct
Which of the following is the highest risk debt issue?
debenture
____ are not secured by specific assets.
debentures
Which of the following types of debt securities protect investors against interest rate risk?
floating rate bonds and extendible notes
When the required rate of return is ____ the coupon rate, the bond will sell at a discount.
greater than
"Junk bond" is a term used to describe a bond that _____.
is rated Ba or lower by Moody's
When the market for an asset is in equilibrium, the expected rate of return on the asset is equal to the ____________.
marginal investor's required rate of return
zero coupon bonds are an example of ______.
original issue deep discount bonds
Which of the following statements concerning preferred stocks is true? a. Preferred stock dividends per share are normally increased as the earnings of the firm increase. b. Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems. c. preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders. d. the par value of a stock is always the same as the initial selling price.
preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.
The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables EXCEPT the ____________. a. maturity value b. uniform annual interest payments c. required rate of return on the bond d. current price
required rate of return on the bond
Which of the following is NOT a characteristic of long-term debt? a. the firm is not legally to pay interest to bondholders. b. interest paid to bondholders is a tax-deductible expense to the firm c. it holders have a fixed claim on the firm's assets in the event of bankruptcy d. it usually has a specific maturity
the firm is not legally to pay interest to bondholders.
CUP Company 8% bonds are currently selling for $950. These bonds (par value of $1,000) mature in one year and pay interest annually. Determine the yield to maturity (to the nearest tenth of 1 percent) on this bond issue.
13.7%
What is the yield to maturity for a Poughkeepsie Gypsy Fortune Tellers' zero coupon bond that matures in 14 years if the bond is selling for $530?
4.64%