FIN 2100 FINAL EXAM (UCF)

B

A $1,000 bond carries a 7.55% coupon. The bond currently trades at $1,100. What would the annual interest payment be on this bond? A. $83.05 B. $75.50 C. $75.05 D. $83.50

C

A $1,000 bond was issued five years ago with an 8% coupon. If interest rates fall for comparable bonds, you would expect the fair market value of the bond to: A. decrease B. remain constant C. increase D. not enough information provided to determine

C

A UCF Graduate is thinking about buying preferred stock of Ceylon Holdings. He/she wants to be protected if the company needs to omit a dividend payment. He/she wants any unpaid dividends to accumulate and be paid before any common stock dividends are paid. What feature of preferred stock would protect the Graduate? A. Convertible B. Callable C. Cumulative D. Credible E. None of the choices

B

A UCF student owns one $1,000 corporate bond issued by Chevron. The bond pays 8.5 percent. If interest is paid semiannually, what is the amount of the check that he/she will receive at the end of each six-month period? A. $4.25 B. $42.50 C. $85 D. $850 E. $1,000

C

A call feature: A. allows bondholders to convert their bond to a specified number of shares of common stock. B. is not available on corporate bonds. C. allows the corporation to buy outstanding bonds from current bondholders before the maturity date. D. is only available with government securities. E. is guaranteed by the corporation.

C

A mutual fund has a 1% operating expense ratio, and you just invested $22,000. How much of your investment will go toward paying the operating expenses of the mutual fund this year? A. $2000 B. $250 C. $220 D. $1250

D

A stock that pays higher than average dividends is called a(n) ____________ stock. A. defensive B. cyclical C. growth D. income E. blue-chip

C

ABC Corp. has earnings of $300,000,000 with 100,000,000 shares outstanding. ABC's earnings per share would be_______? A. $0.30 B. $0.33 C. $3 D. $33

A

ABC fund has a 4.5% front-end sales load and a net asset value of $40. You plan to invest $16,000. How many more shares would you have received if the fund did not have a sales load? A. 18 B. 45 C. 15 D. 16

D

Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of its common stock currently selling at $5 per share. The company earned $10,000,000 after taxes. The annual dividend is $0.50 per share. The firm has assets of $125,000,000 and liabilities of $25,000,000. What is the dividend yield for Acme Widget's common stock? A. $10,000 B. $5.00 C. 5% D. 10% E. Depends on the stockholders purchase price of the stock.

D

All of the following are important matters you should always assess before changing jobs except: A. your current vesting status on the pension plan B. the company's stock C. your 401-K plan D. your 2 week's notice

A

All of the following makes a will legal except: A. Witnesses must be present even if the state allows holographic wills B. Witnesses cannot be heirs C. Will must be signed by at least 2 witnesses D. Must date and sign the will

C

An investor bought 100 shares of JNJ stock for $28.50 per share plus a commission of $10. He/she sold the stock after two years for $38 per share and again paid a commission, this time for $10. The investor received dividends while holding the stock of $0.46 per share per quarter (a total of eight quarters). What is the total gain and annual return on this stock? A. $3800, 15% annual return B. $2850, 10% annual return C. $1,298 gain, 20% annual return. D. $none of the above

D

An investor bought a stock for $40 per share. It now trades for $90 per share and pays an annual dividend of $1 per share ($0.25 per quarter). What is the current dividend yield on this stock? A. 0.28% B. 2.5% C. 4.4% D. 1.1%

B

An investor has 220 shares of Exxon/Mobil stock, which pays a quarterly dividend of $0.40 per share. What is his/her quarterly dividend payment? A. $40 B. $88 C. $550 D. $22

C

An investor has 360 shares of Walmart, which just declared a 2 for 1 stock split. On the day before the stock split, the shares were trading at $80 per share. The day after the split, how many shares does the investor have and how much is each one worth? A. 40 shares, $720/per share B. 720 shares, $160/share C. 720 shares, $40/share D. 180 shares, $160/share

C

An investor has just purchased a bond with a face value of $1,000 that pays 6 percent annually. The purchase price of the bond was 900, and the bond will mature in 5 years. What is the yield to maturity for this bond? A. 5 percent B. 6 percent C. 8.54 percent D. 9 percent E. It is impossible to calculate yield to maturity with the above information.

D

An investor just bought the stock of a company. The investor knows that they will receive a cash payment from the company once a quarter, although the company is not obligated to make this payment. What will the investor receive? A. Equity B. Proxy C. Voting Rights D. Dividends E. None of the choices

D

An investor owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid a dividend of $0.47 a share. What is the total amount he/she received in the dividend check for this quarter? A. $0.47 B. $47 C. $94 D. $103.40 E. It is impossible to calculate the total dividend amount with this information.

A

An investor who wants tax free investment income would choose a (an) _______ fund A. municipal bond B. minimum security C. government bond D. treasury bill

C

Assume that you are a taxpayer in the 28 percent tax bracket. Also, assume that you purchase a tax-exempt bond that pays 5 percent. What is your pretax equivalent yield? A. 5 percent B. 6.0 percent C. 6.94 percent D. 7.2 percent E. 14.4 percent

F

T/F - If you die without a will, the courts will determine how your assets will be distributed based on federal law.

T

T/F - Net passive activity losses are carried forward to future tax returns and available to offset future passive activity gains.

T

T/F - Roth IRA contributions are non-deductible, but earnings grow tax free.

F

T/F - Social security payments are always tax free since they are primarily a return of your money, which was previously deducted from your paycheck.

T

T/F - Some of the disadvantages of direct real estate investments, such as a rental property, include illiquidity and lack of diversification.

B

Direct real estate investments include: A. limited partnerships B. single family dwellings C. syndicates D. REIT's

T

T/F - With respect to interest rates, callable bonds would normally have higher interest rates than non-callable bonds.

A

For 2014, estates up to $____________ are generally not subject to federal estate taxes. A. 5.34 million B. 4.23 million C. 0.575 million D. 2 million

B

How do you calculate the average cost per share? A. total beta/total shares B. total investment /total shares C. total shares/total investment D. total shares/total portfolio

D

If the board of directors approves a two for one stock split, an investor who owns 150 shares before the split owns ____________ shares after the split. A. 75 B. 150 C. 225 D. 300 E. 450

B

Knight Corp.'s stock trades at $60. It has a book value of $15 per share and earnings per share of $3.00. What is the PE ratio for Knight Corp.? A. 4 B. 20 C. 5 D. 15

C

Last year, High-Tech Electronics earned $1.50 per share. If the current market value for a share of stock is $45, what is the firm's PE ratio? A. 0.033 B. 3.3 C. 30 D. 33 E. It is impossible to calculate a PE ratio with this information.

A

Medium term notes usually have maturities of: A. 5-12 years B. 7-9 years C. 6-15 years D. 5-10 years

C

Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the firm's earnings per share? A. $3 a share B. $2 a share C. $1.50 a share D. $0.67 a share E. None of these answers is correct.

T

T/F - A bond is generally sold in increments of $1,000 (including $10,000 and $100,000).

T

T/F - An exchange-traded fund, commonly referred to as an EFT, is a fund that invests in the stocks contained in a specific stock or securities index.

T

T/F - Bonds may be purchased in either the primary or secondary market.

T

T/F - By the time you turn 60, a large percentage of your net worth will likely consist of equity in your primary residence.

T

T/F - Dividends generally come from after-tax earnings of the corporation, and qualifying dividends are taxed again when received by an individual at lower rates.

F

T/F - Earnings per share is a corporation's after-tax earnings divided by the number of stockholders.

F

T/F - Gold prices are more likely to decline during wars or other periods of significant geopolitical uncertainty.

B

What is the goal of an index fund? A. to invest the same amount of money in a fund at regular intervals B. to track the investment return of a specific stock/bond index C. to pool money from investors to buy stocks and bonds D. to track the funds amassed from investments

D

The lowest bond rating issued by Standard & Poor's is: A. A. B. B. C. C. D. D. E. Default.

B

What are payments made to a fund's shareholders that result from the sales of securities in the fund's portfolio? A. capital losses distrubtions B. capital gains distributions C. shareholder loss distributions D. shareholder gains distributions

A

What is a bond that provides federally tax-free interest income? A. municipal bond B. minimum security C. government bond D. treasury bill

D

What is a government security issued in minimum units of $100 with maturities that are 4-week, 13-week, 26-week, and 52-week? A. municipal bond B. minimum security C. government bond D. treasury bill

C

What is the comparable pre-tax yield on a municipal bond yielding 5.2% assuming a marginal tax bracket of 25%? A. 9.1% B. 2.5% C. 6.9% D. 7.3%

C

What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $800? A. 7 percent B. 8 percent C. 8.75 percent D. 10 percent E. 11.4 percent

A

What is the equity risk premium for small company stocks given the following assumptions: Return on small company stocks = 12% Return on Treasury bonds = 5% Inflation rate = 3% A. 7% B. 5% C. 8% D. 9%

C

Which of the following statements is correct? A. Stock is a form of debt capital. B. Stock must be repaid at maturity. C. Bonds are a form of debt capital. D. Bonds do not have to be repaid at maturity. E. Interest payments to bondholders are at the discretion of the corporation.

C

Which type of trust would be used for young adult children, where the deceased parents wish to ensure that the principal of the trust is maintained for a long period of time? A. minor trust B. traditional trust C. spendthrift trust D. children's trust

A

You buy 100 shares of a mutual fund for $10 per share at the beginning of the year. The fund subsequently makes a $0.75/share dividend distribution. At year-end, the fund is worth $15 per share. What is the total return on your investment? A. $575 B. $1000 C. $1500 D. $75