Finance 300 Exam 2

A bond that is payable to whomever has physical possession of the bond is said to be in: A) New-issue condition. B) Registered form. C) Bearer form. D) Debenture status. E) Collateral status

C) Bearer form

Which one of the following risk premiums compensates for the inability to easily resell a bond prior to maturity?A) Default risk. B) Taxability. C) Liquidity. D) Inflation. E) Interest rate risk

C) Liquidity

You purchase a bond with an invoice price of $1,038. The bond has a coupon rate of 9 percent, and there are four months to the next semiannual coupon date. What is the clean price of the bond?

1,023 Accrued interest = 90/2 X 2/6 = 15.00 Clean price = dirty price - accrued interest 1,038 - 15.00 = 1,023

The pure time value of money is known as the: A) Liquidity effect. B) Fisher effect. C) Term structure of interest rates. D) Inflation factor. E) Interest rate factor.

C) Term Structure of interest rates

The next dividend payment by Halestorm, Inc., will be $1.80 per share. The dividends are anticipated to maintain a growth rate of 5 percent forever. The stock currently sells for $35 per share. What is the dividend yield? What is the expected capital gains yield?

5.14% 1.80/35 = 5.14% 5%

YGTB, Inc., currently has an EPS of $1.60 and an earnings growth rate of 8 percent. If the benchmark PE ratio is 33, what is the target share price five years from now?

77.58 EPS5 = EPS0(1 + g)5 EPS5 = $1.60(1 + .08)5 EPS5 = $2.35 P5 = Benchmark PE ratio × EPS5 P5 = 33($2.35) P5 = $77.58

You purchase a bond with a coupon rate of 7.5 percent and a clean price of $850. If the next semiannual coupon payment is due in two months, what is the invoice price?

875.00 Accrued interest = 75/2 X 4/6 = 25.00 Dirty price = clean price + accrued interest 850 + 25.00 = 875

The break-even tax rate between a taxable corporate bond yielding 7 percent and a comparable nontaxable municipal bond yielding 5 percent can be expressed as: A) .05 / (1 - t*) = .07. B) .05 - (1 - t*) = .07. C) .07 + (1 - t*) = .05. D) .05 × (1 - t*) = .07. E) .05 × (1 + t*) = .07.

A) .05 / (1 - t*) = .07

You purchase a bond with an invoice price of $1,319. The bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are two months to the next semiannual coupon date. What is the clean price of this bond? A) $1,298.17 B) $1,352.17 C) $1,314.14 D) $1,408.12 E) $1,283.50

A) 1298.17 Accrued interest = (.0625 × $1,000) × 1/2 × 4/6 = $20.83 Clean price = $1,319 - 20.83 = $1,298.17

The common stock of Eddie's Engines, Inc. sells for $45.68 a share. The stock is expected to pay $4.10 per share next year. Eddie's has established a pattern of increasing their dividends by 6.2 percent annually and expects to continue doing so. What is the market rate of return on this stock? A) 15.18 percent B) 11.14 percent C) 8.98 percent D) 17.67 percent E) 7.26 percent

A) 15.18 percent r = $4.10 / $45.68 + 0.062 = 15.18 percent

A firm has a current EPS of $2.54 and a benchmark PE of 16.4. Earnings are expected to grow 3.8 percent annually. What is the target stock price in one year? A) $43.24 B) $42.89 C) $46.08 D) $41.66 E) $48.09

A) 43.24 P1 = $2.54 × (1 + .038) × 16.4 = $43.24

The current dividend yield on CJ's common stock is 1.89 percent. The company just paid a $1.23 annual dividend and announced plans to pay $1.27 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? A) 5.14 percent B) 5.82 percent C) 6.08 percent D) 6.39 percent E) 6.75 percent

A) 5.14 R = .0189 + [($1.27 - 1.23) / $1.23] = .0514, or 5.14 percent

An investor with a 25 percent marginal tax rate is choosing to invest in either a corporate bond with a before-tax annual yield of 7.3% or a municipal bond. What must be the annual rate of return that the municipal bond offers to make the investor indifferent between the two securities? A) 5.48% B) 5.84% C) 6.08% D) 7.30% E) 9.73%

A) 5.48% 0.73 X (1 - .25) = .0548 = 5.48%

The current dividend yield on Clayton's Metals common stock is 3.2 percent. The company just paid a $1.48 annual dividend and announced plans to pay $1.54 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? A) 7.25% B) 7.82% C) 8.08% D) 8.39% E) 8.75%

A) 7.25% g = (1.54 - 1.48) / 1.48 = .04054 0.032 + 0.04054 = .0725

An agent who arranges a transaction between a buyer and a seller of equity securities is called a: A) Broker. B) Floor trader. C) Capitalist. D) Principal. E) Dealer.

A) Broker

Which one of the following premiums is compensation for the possibility that a bond issuer may not pay a bond's interest or principal payments as expected? A) Default risk. B) Taxability. C) Liquidity. D) Inflation. E) Interest rate risk

A) Default risk

Real rates are defined as nominal rates that have been adjusted for which of the following? A) Inflation. B) Default risk. C) Accrued interest. D) Interest rate risk. E) Both inflation and interest rate risk

A) Inflation

The outstanding bonds of Roy Thomas, Inc. provide a real rate of return of 3.8 percent. The current rate of inflation is 2.2 percent. What is the nominal rate of return on these bonds? A) 1.06 percent B) 6.08 percent C) 1.02 percent D) 6.00 percent E) 1.60 percent

B (1+R) = (1+r)(1+h) 1 + R = (1+0.038)X(1+0.022) R = 6.08%

A bond with a coupon rate of 7% makes semiannual coupon payments on January 15 and July 15 of each year. The quoted price for the bond on January 30 (i.e., 15 days after the last coupon payment) was $1,001.875. What is the invoice price of the bond? (Assume the current coupon period has 182 days.)? A) $1,001.88 B) $1,004.76 C) $1,019.38 D) $1,033.99 E) $1,036.88

B) 1004.76 ((1000 X .07) / 2) X (15 / 182) = 2.8846 1001.875 + 2.8846 = 1004. 76

Wilton's Market just announced its next annual dividend will be $1.50 a share. It expects the dividends to grow by 1.8 percent annually forever. How much will one share of this stock be worth five years from now if the required return is 15.5 percent?A) $11.76 B) $11.97 C) $14.14 D) $12.19 E) $13.79

B) 11.97 P5 = (1.50 X 1.018 ^5) / (.155 - 0.018) = 11.97

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? A) 12.26 years B) 12.53 years C) 18.49 years D) 24.37 years E) 25.05 years

B) 12.53 N = ? I/Y = 6.72/2 PV = 1023.46 PMT = 35 FV = 1000 N = 25.052 25.052 / 2 = 12.53

The preferred stock of Into Eternity pays an annual dividend of $6.50 and sells for $42.19 a share. What is the dividend yield? A) 2.74% B) 6.49% C) 6.50% D) 14.17% E) 15.41%

B) 15.41% 6.50/42.19 = 15.41%

A newly issued 20-year, $1,000, zero coupon bond just sold for $311.05. What is the implicit interest, in dollars, for the first year of the bond's life? Assume semiannual compounding. A) $17.72 B) $18.70 C) $18.47 D) $17.63 E) $17.89

B) 18.70 Bond price 0 = $311.05 = $1,000 / [1 + (r / 2)](20 × 2); r = 5.925% Bond price 1 = $1,000 / [1 + (.05925 / 2)](19 × 2) = $329.75 Implicit interest = $329.75 - 311.05 = $18.70

A Treasury yield curve plots Treasury interest rates relative to which one of the following? A) Market rates. B) Comparable corporate bond rates. C) The risk-free rate. D) Inflation. E) Maturity.

E) Maturity

*Marcel Co. is growing quickly. Dividends are expected to grow at a 24 percent rate for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent and the company just paid a $1.70 dividend. what is the current share price? A) $41.70 B) $40.88 C) $40.06 D) $37.17 E) $38.57

B) 40.88 P3 = D3 (1 + g2) / (R - g2) = D0 (1 + g1)3 (1 + g2) / (R - g2) = $1.70(1.24)3(1.05) / (.12 - .05) = $48.62 P0 = $1.70(1.24) / 1.12 + $1.70(1.24)2 / 1.122 + $1.70(1.24)3 / 1.123 + $48.62 / 1.123 P0 = $40.88

Antiques R Us is a mature manufacturing firm. The company just paid a $12 dividend, but management expects to reduce the payout by 6 percent per year indefinitely. If you require an 16 percent return on this stock, what will you pay for a share today? A) $50.76 B) $54.55 C) $51.27 D) $112.80 E) $51.79

B) 54.55 P0 = D0 (1 + g) / (R - g) P0 = $12(1 - .06) / [(.16 - (- .06)] P0 = $51.27

Amon Amarth Co. offers 10-year, 8 percent coupon bonds with semiannual payments and a yield to maturity of 8.24 percent. What is the market price of a $1,000 face value bond? A) $990.32 B) $983.86 C) $1,108.16 D) $1,521.75 E) $591.04

B) 983. 86 N = 20 I = 8.24/2 PV = ? PMT = 40 FV = 1000 PV = 983.86

U. S. Treasury bonds: A) Are highly illiquid. B) Are quoted as a percentage of par. C) Are quoted at the dirty price. D) Pay interest that is federally tax-exempt. E) Must be held until maturity

B) Are quoted as a percentage of par

Which one of the following is the price at which a dealer will sell a bond? A) Call price B) Asked price C) Bid price D) Bid-ask spread E) Par value

B) Asked Price

A bond that can be paid off early at the issuer's discretion is referred to as being which type of bond? A) Par value. B) Callable. C) Senior. D) Subordinated. E) Unsecured.

B) Callable

A sinking fund is managed by a trustee for which one of the following purposes? A) Paying bond interest payments. B) Early bond redemption. C) Converting bonds into equity securities. D) Paying preferred dividends. E) Reducing bond coupon rates.

B) Early Bond Redemption

The next dividend payment by Hot Wings, Inc., will be $4.75 per share. The dividends are anticipated to maintain a 5 percent growth rate forever. If the stock currently sells for $60 per share, what is the required return? A) 7.92% B) 5.00% C) 12.92% D) 12.66% E) 12.27%

C) 12.92% R = (D1 / P0) + g = ($4.75 / $60) + .05 = .1292 or 12.92%

A 3.25 percent Treasury bond is quoted at a price of 101.16. The bond pays interest semiannually. What is the current yield? A) 3.06 percent B) 3.17 percent C) 3.21 percent D) 3.33 percent E) 3.38 percent

C) 3.21 percent Current yield = (.0325 × $1,000) / (1.0116 × $1,000) = .0321, or 3.21 percent

Weisbro and Sons common stock sells for $44 a share and pays an annual dividend that increases by 3.1 percent annually. The market rate of return on this stock is 10.80 percent. What is the amount of the last dividend paid by Weisbro and Sons? A) $3.50 B) $3.29 C) $4.61 D) $1.32 E) $3.26

C) 4.61 P0 = $44 = [D0 × (1 + 0.031)] / (0.1080 - 0.031); D0 = $3.29

The outstanding bonds of Dark Tranquility, Inc. provide an annual real rate of return of 2.9 percent. Given the current rate of inflation is 1.8 percent, what is the nominal rate of return on these bonds? A) 1.05 percent B) 1.10 percent C) 4.75 percent D) 5.22 Percent E) 14.75 Percent

C) 4.75 (1 + R) = (1 + r)(1 + h) R = 4.75%

A firm has a current EPS of $2.54 and a benchmark price-earnings (PE) ratio of 16.4. Earnings are expected to grow 3.8 percent annually. What is the expected stock price in one year based on the PE ratio? A) $41.66 B) $42.89 C) $43.24 D) $46.08 E) $48.09

C) 43.24 2.54 X 16.4 X (1 + .038) = 43.24

A share of common stock has just paid a dividend of $3.00. If the expected long-run growth rate for this stock is 5 percent, and if investors require an 11 percent return, what is the price of the stock? A) $50.00 B) $50.50 C) $52.50 D) $53.00 E) $63.00

C) 52.50 (3.00(1.05)) / (0.11-.05) = 52.50

A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called the: A) Dirty price. B) Redemption value. C) Call premium. D) Original-issue discount. E) Redemption discount.

C) Call Premium

A bond is quoted at a price of $1,011. This price is referred to as the: A) Call price. B) Face value. C) Clean price. D) Dirty price. E) Maturity price

C) Clean Price

A floor broker on the NYSE does which one of the following? A) Supervises the commission brokers of a specific financial firm. B) Trades for his or her personal inventory. C) Executes orders on behalf of a commission broker. D) Maintains an inventory and assumes the role of a market maker. E) Is charged with maintaining a liquid, orderly market.

C) Executes orders on behalf of a commission broker

A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today? A) The face value of the bond today is greater than it was when the bond was issued. B) The bond is worth less today than when it was issued. C) The yield-to-maturity is less than the coupon rate. D) The coupon rate is greater than the current yield. E) The yield-to-maturity equals the current yield.

C) The yield-to-maturity is less than the coupon rate

All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity. A) a premium; less than B) a premium; equal to C) a discount; less than D) a discount; higher than E) par; less than

C) a discount; less than

Bonds issued by the U.S. government: A) Are considered to be free of interest rate risk. B) Generally have higher coupons than comparable bonds issued by a corporation. C) Are considered to be free of default risk. D) Pay interest that is exempt from federal income taxes. E) Are called "munis."

C) are considered to be free of default risk

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a: A) Floor trader. B) Floor post. C) designated market maker. D) Floor broker. E) Commission broker

C) designated market maker

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market? A) Auction. B) Private. C) Over-the-counter. D) Regional. E) Insider.

C) over-the-counter

Say you own an asset that had a total return last year of 13.5 percent. If the inflation rate last year was 3 percent, what was your real return? A) 10.09% B) 10.39% C) 10.29% D) 10.19% E) -9.25%

D (1+R) = (1+r)(1+h) r = ((1+0.135)/(1.03)) - 1 = 10.19%

A bond that pays interest annually yields a rate of return of 10.00 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond? A) 4.00 percent B) 1.06 percent C) 2.50 percent D) 5.77 percent E) 14.00 percent

D (1+R) = (1+r)(1+h) r = 1.1000 / 1.04 -1 = 5.77%

Currently, a firm has an EPS of $2.54 and a benchmark PE of 16.4. Earnings are expected to grow 3.8 percent annually. What is the estimated current stock price? A) $43.24 B) $42.89 C) $46.08 D) $41.66 E) $48.09

D) 41.66 P0 = $2.54 × 16.4 = $41.66

A Treasury bond is quoted at a price of 101.6533 with a current yield of 6.276 percent. What is the coupon rate on a $10,000 bond? A) 7.20 percent B) 6.48 percent C) 6.41 percent D) 6.38 percent E) 6.27 percent

D) 6.38 percent Price = 1.016533 × $10,000 = $10,165.33 Annual interest = .06276 × $10,165.33 = $637.98 Coupon rate = $637.98 / $10,000 = 6.38 percent

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 $1,032. What is the yield to maturity? A) 6.87 percent B) 6.92 percent C) 6.08 percent D) 6.48 percent E) 7.20 percent

D) 6.48% N = 16 I/Y = ? PV = 1032 PMT = 35 FV = 1000 I/Y = 3.2405 3.2405 X 2 = 6.48%

Bonner Metals wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8.5 percent bonds on the market that sell for $959, make semiannual payments, and mature in 16 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par? A) 8.75 percent B) 9.23 percent C) 8.41 percent D) 8.99 percent E) 8.67 percent

D) 8.99 percent N = 32 I/Y = ? PV = 959 PMT = 42.50 FV = 1000 I/Y = 4.494 4.494 X 2 = 8.99%

Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent return on this investment, which of the following is closest to the price you are willing to pay for the bond? A) $619 B) $674 C) $761 D) $828 E) $902

D) 828 N = 40 I = 5 PV = ? PMT = 40 FV = 1000 PV = 828

The taxability risk premium compensates bondholders for which one of the following? A) Yield decreases in response to market changes. B) Lack of coupon payments. C) Possibility of default. D) A bond's unfavorable tax status. E) Decrease in a municipality's credit rating.

D) A bond's unfavorable tax status

A note is generally defined as: A) A secured bond with an initial maturity of 10 years or more. B) A secured bond that initially matures in less than 10 years. C) Any bond secured by a blanket mortgage. D) An unsecured bond with an initial maturity of 10 years or less. E) Any bond maturing in 10 years or more.

D) An unsecured bond with an initial maturity of 10 years or less

Which one of the following rights is never directly granted to all shareholders of a publicly held corporation? A) Electing the board of directors. B) Receiving a distribution of company profits. C) Voting either for or against a proposed merger or acquisition. D) Determining the amount of the dividend to be paid per share. E) Having first chance to purchase any new equity shares that may be offered.

D) Determining the amount of dividend to be paid per share

A newly issued bond has a 7 percent coupon with semiannual interest payments. The bonds are currently priced at par. The effective annual rate provided by these bonds must be: A) 3.5 percent. B) Greater than 3.5 percent but less than 7 percent. C) 7 percent. D) Greater than 7 percent. E) Less than 3.5 percent

D) Greater than 7 percent

The secondary market is best defined by which one of the following? A) Market in which subordinated shares are issued and resold. B) Market conducted solely by brokers. C) Market dominated by dealers. D) Market where outstanding shares of stock are resold. E) Market where warrants are offered and sold.

D) Market where outstanding shares of stock are resold

The bond market requires a return of 9.8 percent on the five-year bonds issued by JW Industries. The 9.8 percent is referred to as which one of the following? A) Coupon rate. B) Face rate. C) Call rate. D) Yield to maturity. E) Current yield

D) Yield to Maturity

The bond market requires a return of 9.8 percent on the five-year bonds issued by JW Industries. The 9.8 percent is referred to as which one of the following? A) Coupon rate. B) Face rate. C) Call rate. D) Yield to maturity. E) Current yield.

D) Yield to Maturity

Which one of the following represents the capital gains yield as used in the dividend growth model? A) D1 B) D1 / P0 C) P0 D) g E) g / P0

D) g

Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and selling for $1,382.01. At this price, the bonds yield 7.5 percent. What is the coupon rate? A) 8.00 percent B) 8.50 percent C) 9.00 percent D) 10.50 percent E) 12.00 percent

E) 12.00 percent Bond price = $1,382. 01 = C × ({1 - [1 / (1 + .075)14]} / .075) + $1,000 / (1 + .075)14 C = $120 Coupon rate = $120 / $1,000 = .12, or 12%

Global Exporters wants to raise $29.6 million to expand its business. To accomplish this, it plans to sell 20-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 7.75 percent. What is the minimum number of bonds it must sell to raise the money it needs? Assume semiannual compounding. A) 110,411 B) 139,800 C) 154,907 D) 126,029 E) 135,436

E) 135,436 Bond price = $1,000 / [1 + (.0775 / 2)](20 × 2) = $218.554 Number of bonds = $29,600,000 / $218.544 = 135,436 bonds

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 9 percent? A) $17.08 B) $16.30 C) $16.67 D) $16.79 E) $17.50

E) 17.50 P3 = $1.60 / .09 = $17.78 P0 = $1.45 / (1 + .09) + $1.50 / (1 + .09)2 + ($1.53 + 17.78) / (1 + .09)3 P0 = $17.50

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 $972. Interest is paid semiannually. What is the yield to maturity? A) 6.36 percent B) 6.42 percent C) 5.61 percent D) 5.74 percent E) 5.92 percent

E) 5.92 percent N = 17 I/Y = ? PV = 972 PMT = 27.50 FV = 1000 I/Y = 2.962 2.962 X 2 = 5.92%

Protective covenants: A) Apply to short-term debt issues but not to long-term debt issues. B) Only apply to privately issued bonds. C) Are a feature found only in government-issued bond indentures. D) Only apply to bonds that have a deferred call provision. E) Are primarily designed to protect bondholders.

E) Are primarily designed to protect bondholders

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n): A) Floor trader. B) Dealer. C) Specialist. D) Executor. E) Commission broker.

E) Commission broker

An agent who maintains an inventory from which he or she buys and sells securities is called a: A) Broker. B) Trader. C) Capitalist. D) Principal. E) Dealer.

E) Dealer

Jason's Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms? A) Note. B) Discounted. C) Zero-coupon. D) Callable. E) Debenture.

E) Debenture

Callable bonds generally: A) Grant the bondholder the option to call the bond anytime after the deferment period. B) Are callable at par as soon as the call-protection period ends. C) Are called when market interest rates increase. D) Are called within the first three years after issuance. E) Have a sinking fund provision.

E) Have a sinking fund provision

Which bond would you generally expect to have the highest yield? A) Risk-free Treasury bond B) Non-taxable, highly-liquid bond C) Long-term, high-quality, tax-free bond D) Short-term, inflation-adjusted bond E) Long-term, taxable junk bond

E) Long-term, taxable junk bond

Interest rates that include an inflation premium are referred to as: A) Annual percentage rates. B) Stripped rates. C) Effective annual rates. D) Real rates. E) Nominal rates

E) Nominal Rates

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities? A) Senior bond. B) Debenture. C) Warrant. D) Common stock. E) Preferred stock.

E) Preferred stock

Emst & Frank stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets? A) Private. B) Auction. C) Tertiary. D) Secondary. E) Primary.

E) Primary

The items included in an indenture that limit certain actions of the issuer in order to protect a bondholder's interests are referred to as the: A) Trustee relationships. B) Bylaws. C) Legal bounds. D) Trust deed. E) Protective covenants.

E) Protective Covenants

Which one of the following statements is correct? A) The risk-free rate represents the change in purchasing power. B) Any return greater than the inflation rate represents the risk premium. C) Historical real rates of return must be positive. D) Nominal rates exceed real rates by the amount of the risk-free rate. E) The real rate must be less than the nominal rate given a positive rate of inflation.

E) The real rate must be less than the nominal rate given a positive rate of inflation

Which of the following statement is most FALSE? A) Market expectations of interest rates affect shape of the yield curve. B) Because interest rates tend to fall in response to an economic slowdown, an inverted yield curve is often interpreted as a negative forecast for economic growth. C) Bond markets are primarily over-the-counter transactions. D) Inverted yield curve tend to precede recessions. E) The yield curve tends to be sharply decreasing as the economy comes out of a recession and interest rates are expected to rise.

E) The yield curve tends to be sharply decreasing as the economy comes out of a recession and interest rates are expected to rise.

You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called? A) Alternative voting. B) Cumulative voting. C) Straight voting. D) Indenture voting. E) Voting by proxy.

E) Voting by proxy

You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semiannual compounding periods. What is the price of the bond?

N = 19X2 I/Y = 4.1%/2 PV = ? FV = 1000 PV = 4624.94

Sqeekers Co. issued 11-year bonds a year ago at a coupon rate of 8.9 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 7.2 percent, what is the current bond price?

N = 20 I/Y = 7.2%/2 PV = ? PMT = 89/2 FV = 1000 PV = 1119.72

Heginbotham Corp. issued 15-year bonds two years ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If these bonds currently sell for 109 percent of par value, what is the YTM?

N = 26 I/Y = ? PV = 1090 PMT = 79/2 FV = 1000 I/Y = 3.422

Ponzi Corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.1 percent, and a current price of $1,038. The bonds make semiannual payments. What must the coupon rate be on these bonds?

N = 29 I/Y = 6.1%/2 PV = 1038 PMT = ? FV = 1000 PMT = 32.49 (32.49 X 2 (semi)) / 1000 = 6.50%