FIN 300 EXAMMMM 2!!!!!!

Which bond would you generally expect to have the highest yield?

long-term, taxable junk bond

The current yield is defined as the annual interest on a bond divided by the:

market price

DLQ. Inc. bonds mature in 12 years and have a coupon rate of 6 percent. If the market rate of interest increases, then the:

market price of the bond will decrease

The final decision on which one of two mutually exclusive projects to accept ultimately depends upon which one of the following?

net present value

Which one of the following methods predicts the amount by which the value of a firm will change if a project is accepted?

net present value

Interest rates that include an inflation premium are referred to as:

nominal rates

The length of time a firm must wait to recoup the money it has invested in a project is called the:

payback period

There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:

have multiple rates of return

You purchase a bond with an invoice price of $1,119. The bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are four months to the next semiannual coupon date. What is the clean price of this bond?

$1,108.58

A firm has a current EPS of $1.63 and a benchmark PE of 11.7. Earnings are expected to grow 2.6 percent annually. What is the target stock price in one year?

$19.57

Future Motors is expected to pay an annual dividend next year of $3.10 a share. Dividends are expected to increase by 1.85 percent annually. What is one share of this stock worth at a required rate of return of 15 percent?

$23.57

AC Electric just paid its annual dividend of $2.42. The firm plans to increase its dividend by 2.5 percent for the next 3 years and then maintain a constant 2 percent rate of dividend growth. The required return is 12.5 percent. What is the current value per share of this stock?

$23.82

Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

$26.42

The semiannual, 8-year bonds of Alto Music are selling at par and have an effective annual yield of 8.6285 percent. What is the amount of each interest payment if the face value of the bonds is $1,000?

$42.25

A project has a required return of 12.6 percent, an initial cash outflow of $42,100, and cash inflows of $16,500 in Year 1, $11,700 in Year 2, and $10,400 in Year 4. What is the net present value?

-$11,748.69

The current dividend yield on CJ's common stock is 1.89 percent. The company just paid an annual dividend of $1.56 and announced plans to pay $1.70 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

10.86 percent

World Travel has 7 percent, semiannual, coupon bonds outstanding with a current market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent. How many years is it until these bonds mature?

12.53 years

The Dry Dock is considering a project with an initial cost of $107,400 and cash inflows for Years 1 to 3 of $37,200, $54,600, and $46,900, respectively. What is the IRR?

13.41 percent

A project has cash flows of −$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. Based on the internal rate of return of ________ percent, you should ________ the project.

13.96; accept

Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $548. The yield to maturity is 13.2 percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature?

17.84 years

A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years, respectively. What is the payback period?

3.13 years

New Homes has a bond issue with a coupon rate of 5.5 percent that matures in 8.5 years. The bonds have a par value of $1,000 and a market price of $1,022. Interest is paid semiannually. What is the yield to maturity?

5.18 percent

The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock?

6.41%

The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity?

7.22%

Do-Well bonds have a face value of $1,000 and are currently quoted at 867.25. The bonds have coupon rate of 6.5 percent. What is the current yield on these bonds?

7.49%

Which one of the following represents the capital gains yield as used in the dividend growth model?

g

Which one of the following indicates an accept decision for an independent project with conventional cash flows?

PI greater than 1.0

Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.9 years and a net present value of $4,200. Project B has an expected payback period of 3.1 years with a net present value of $26,400. Which project(s) should be accepted based on the payback decision rule?

Project A only

Which one of the following transactions occurs in the primary market?

a purchase of newly issued stock from the issuer

When the present value of the cash inflows exceeds the initial cost of a project, then the project should be:

accepted because the profitability tax index is greater than 1

NYSE designated market makers:

act as dealers

A bond is quoted at a price of $1,011. This price is referred to as the:

clean price

An agent who maintains an inventory from which he or she buys and sells securities is called a:

dealer

What are the distributions of either cash or stock to shareholders by a corporation called?

dividends

A discount bond's coupon rate is equal to the annual interest divided by the:

face value

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n):

floor broker

Applying the discounted payback decision rule to all projects may cause:

some positive net present value projects to be rejected

Which of these statements related to discounted payback is correct?

the discounted payback period increases as the discount rate decreases

Winston Co. has a dividend yield of 5.4 percent and a total return for the year of 4.8 percent. Which one of the following must be true?

the stock has a negative capital gains yield

A Treasury yield curve plots Treasury interest rates relative to:

time to maturity