Final Exam FIN 301

Werden Drilling offers 5.5 percent coupon bonds with semiannual payments and a yield to maturity of 7 percent. The bonds mature in 10 years. What is the market price per bond if the face value is $1,000?

$893.41

Your portfolio is comprised of 22 percent of Stock X, 32 percent of Stock Y, and 46 percent of Stock Z. Stock X has a beta of 1.04, Stock Y has a beta of .96, and Stock Z has a beta of 1.24. What is the beta of your portfolio?

1.106

Walker Systems has an issue of preferred stock outstanding with a stated annual dividend of $2.60 that just sold for $23.85 per share. What is the bank's cost of preferred stock?

10.90%

Nguyen Corporation's common stock has a beta of 1.38. The risk-free rate is 1.78 percent and the expected return on the market is 14.6 percent. What is the cost of equity?

19.47%

The 30-year, 5.5 percent bonds issued by Modern Kitchens pay interest semiannually, mature in four years, and have a $1,000 face value. Currently, the bonds sell for $1,020.66. What is the yield to maturity?

4.92%

Nazarian's has bonds on the market with 13 years to maturity, a YTM of 7.6 percent, and a current price of $901.98. The bonds make semiannual payments and have a face value of $1,000. What is the coupon rate?

6.40%

Of the options listed below, which is the best measure of systematic risk?

Beta

Which of the following statements regarding unsystematic risk is accurate?

It can be effectively eliminated by portfolio diversification.

Based on the capital asset pricing model (CAPM), which of the following should earn the highest risk premium?

Stock with a beta of 1.24

When calculating a firm's weighted average cost of capital, the capital structure weights:

are based on the market values of the outstanding securities.

What is the model called that determines the market value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?

constant growth model

Ana just received the semiannual payment of $35 on a bond she owns. This is called the ______ payment.

coupon

The bond market requires a return of 6.2 percent on the 15-year bonds issued by Mingwei Manufacturing. The 6.2 percent is referred to as the:

coupon rate

While evaluating a stock, you estimate that it will earn a return of 11 percent if economic conditions are favorable, and 3 percent if economic conditions are unfavorable. Given the probabilities of favorable versus unfavorable economic conditions, you conclude that the stock will earn 7.2 percent next year. The 7.2 percent figure is called the:

expected return.

A bond's principal is repaid on the ________ date.

maturity

To calculate the expected risk premium on a stock, one must subtract the ________ from the stock's expected return.

risk-free rate

To determine a firm's cost of capital, one must include:

the returns currently required by both debtholders and stockholders.

Rao Investments 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

Ahmad Couture has bonds outstanding with a face value of $1,000, 11 years to maturity, and a coupon rate of 6 percent paid semiannually. What is the company's pretax cost of debt if the bonds currently sell for $1,067.12?

5.19%

Which one of the following rights is never directly granted to all shareholders of a publicly held corporation?

Determining the amount of the dividend to be paid per share