Exam 2 MANG
Homer's Trucking Company bonds have an 11% coupon rate. Interest is paid semi-annually. The bonds have a par value of 1000 and will mature in 8 years from now. Compare the value of Homer's Trucking Company bonds i investors' required rate of return is 9.5%.
$1,082.75
You have contracted to buy a house for $250,000, paying $30,000 down and taking out a fully amortizing loan for the balance, at a 5.7% annual rate for 30 years. What will your monthly payment be if they make equal monthly installments over the next 30 years (to the nearest dollar)?
$1,277
What is the future value of $500 invested at 9.5% compounded quarterly for 12.5 years?
$1,617
Casino Games Company preferred stock pays a perpetual annual dividend of 3.5% of its $100 par value. If investors' required rate of return on this stock is 11%, what is the value per share?
$31.82
Halverson Inc just issued $1,000 par 20-year bonds. The bonds sold for $936 and pay interest semi-annually. Investors require a rate of 7.00% on the bonds. What is the amount of semi-annual interest payment on the bonds?
$32.00
A zero coupon bond pays no annual interest payments. When it matures at the end of 8 years it pays out $1,000. If investors wish to earn 7.5% per year on this bond investment, what is the current price of the bond?
$561
Kilsheimer Company just paid a dividend today of $5 per share. The dividend is expected to grow at a constant rate of 7% per year. What is the value of the stock if the required return in 16%?
$59.44
It is January 1st and Darwin Davis has just established an IRA Darwin will put $1,000 into the account on December 31st of this year and at the end of each year for the following 39 years (40 total). How much money will Darwin have in his account at the end of the 40th year? Assume that the account pays 12% interest compounded annually and round to the nearest $1,000.
$767,000
Podunk Communications bonds mature in 6 1/2 years with a par value of $1000. They pay a coupon rate of 9% with semi-annual payments. If the required rate of return on these bonds is 11% what is the bond's value?
$908.83
What is the present value of 15,500 to be received 12 years from today? Assume a discount rate of 7.5% compounded annually and round to the nearest $1.
%6, 508
Greenland Airlines has a net income of 2 million this year. The book value of Greenland Airlines common equity if 8 million. The company's dividend payout ratios is 60% and its expected to remain this way. What is Greenland Airlines internal growth rate?
10%
A financial analyst tells you that investing in stocks will allow you to double your money in 7 years. What annual rate of return is the analyst assuming you can earn?
10.41%
Butler Corp paid a dividend today of $5 per share. The dividend is expected to grow at a constant rate of 6.5% per year. If Butler Corp stock is selling for $50.00 per share, the stockholders' expected rate of return is
16.5%
The purchased 800 shares of Robotics stock at $3 per share on 1/1/09. Bill sold the shares on 12/31/09 for $3.45. Robotics stock has a beta of 1.9, the risk-free rate of return is 4%, and the market risk premium is 9%. The required return on Robotics stock is
21.1%
Metal Fabricators just issued $1,000 par 20-year bonds. The bonds sold for $758.18, and pay interest semi-annually. Investors require a rate of 9% on the bonds. What is the bond's coupon rate?
6%
At what rate must $500 be compounded annually for it to grow to $1,079.46 in 10 years
8%
You charged $1,000 on your credit card for Christmas presents. Your credit card company charges you 26% annual interest, compounded monthly. If you make the minimum payments of $25 per month, how long will it take (to the nearest month) to pay off your balance?
94 months.
Junk, or non-investment-grade, bonds have an S&P bond rating of
BB or less
A small biotechnology research corporation has been experiencing loses for the first three years of its existence, and thus has a negative balance in retained earnings. The corporation's stock price, however, is $1 per share. Which of the following statements is most correct?
Investors believe the stock is worth $1 per share because future earnings (and cash flows) are expected to be positive.
Which of the following statements is true?
Long-term bonds have greater interest rate risk than do short-term bonds.
You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk?
Risk resulting from uncertainty regarding a possible strike against Ford. Risk resulting from an expensive recall of a Ford product.
A typical measure for the risk-free rate of return is the
U.S. Treasury Bill rate
Beginning with an investment in one company's securities, as we add securities of other companies to our portfolio, which type of risk declines?
Unsystematic Risk
Who bears the greatest risk of loss of value if a firm should fail?
common stock holders
Of the following different types of securities, which is typically considered most risky?
common stocks of small companies
Using constant growth dividend valuation model and assuming dividends will grow a constant rate forever, the increase in the value of the stock each year should be equal to the
growth rate in dividends, g
Shafer Corporation issued callable bonds. The bonds are most likely to be called if
interest rates decrease
Suppose interest rates have been at historically low levels the past two years. A reasonable strategy for bond investors during this time period would be to
invest short-term bonds to reduce interest rate risk
A bond will sell at a premium (above oar value) if
investor's current required rate of return is below the coupon rate of the bond
If market interest rates rise
long-term bonds will rise in value more than long-term bonds
A stock's beta is a measure of its
systematic risk
You have the choice of two equally risk annuities, each paying $5000 per year for 8 years. One is an annuity due and the other is an ordinary annuity. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth?
the annuity due
