Unit 2 series 66

In order to compute yield to maturity, all of the following are necessary except A) the current market price. B) the maturity date. C) the call price. D) the nominal yield.

the call price.

An investor purchases a Treasury note and the confirmation shows a price of 102.21. Rounded to the nearest cent, the investor's cost, excluding commissions, is A) $1,022.10. B) $1,022.21. C) $102.21. D) $1,026.56.

$1,026.56. Treasury notes are quoted in 32nds, where each 32nd equals $0.3125. The 102 in the quote equals $1,020 and the 21/32 is an additional $6.56, bringing the total to $1,026.56. 21/32 then *10

Your client is interested in investing in preferred stocks in an effort to receive dividend income. The client's target goal is a 6% current return on investment (ROI). If the RIF Series B preferred stock is paying a quarterly dividend of $0.53, your client's goal will be achieved if the RIF can be purchased at A) $22.55. B) $35.33. C) $8.83. D) $50.00.

$35.33. First, take the quarterly dividend and annualize it (4 × $0.53 = $2.12). Dividing that number by 6% gets you $35.3333, which rounds down to $35.33. Alternatively if you wish (but which takes more time), multiply each of the choices by 6% to see which of them equals $2.12.

An investor owns a debenture convertible into 20 shares of the issuer's common stock. After a 2-for-1 stock split, the terms of the debenture provide for conversion into 40 shares. This is because the debenture has A) preemptive rights. B) an antidilution clause. C) warrants attached. D) increased its par value to $2,000 to account for the split.

an antidilution clause.

A bond's yield to maturity is A) set at issuance and printed on the face of the bond. B) determined by dividing the coupon rate by the bond's current market price. C) the annualized return of a bond if it is held to call date. D) the annualized return of a bond if it is held to maturity.

the annualized return of a bond if it is held to maturity.

An investor purchasing 10 corporate bonds at a price of 102¼ each will pay A) $1,022.50. B) $10,202.50. C) $10,225.00. D) $1,020.25.

$10,225.00. At 102¼, each bond costs $1,022.50 (102 = 1,020 and ¼ of $10 = $2.50). There are 10 bonds, so the total is $1,022.50 × 10 = $10,225.

A bond with a par value of $1,000 and a coupon rate of 6% paid semiannually is currently selling for $1,200. The bond is callable in 15 years at 105. In the computation of the bond's yield to call, which of these would be a factor? A) Present value of $1,050 B) Future value of $1,200 C) 15 payment periods D) Interest payments of $30

Interest payments of $30 The yield to call (YTC) computation involves knowing the amount of interest payments to be received, the length of time to the call, the current price, and the call price.

A company has paid a dividend every quarter for the past 20 years. If the stock's price has fallen dramatically over the past quarter but the dividend has remained the same, it may be concluded that A) the dividend yield to maturity has decreased. B) the current dividend yield has decreased. C) the current dividend yield has remained the same. D) the current dividend yield has increased.

the current dividend yield has increased. The current dividend yield is income dividend divided by price. If the price of a stock decreases and the dividend remains the same, the dividend yield will increase.

The GHIJ Corporation has a 3% convertible debenture outstanding with a conversion price of $40. The bond's current market price is 126. The most probable reason for this is A) interest rates have risen since the debenture was issued. B) GHIJ's earnings have risen since the debenture was issued. C) the current market price of the GHIJ common stock is approximately $35 per share. D) the current market price of the GHIJ common stock is approximately $50 per share.

the current market price of the GHIJ common stock is approximately $50 per share. With a conversion price of $40, the bond is convertible into 25 shares. Convertible securities generally sell at a slight premium to their parity price, which—at $1,260—would be $50.40 per share.