Problem 1. The Unzip Snap Company had net earnings of $127,000 this past year. Dividends were paid of $38,100 on the company's equity of $1,587,500. The estimated growth for Unzip is:
(A) 2.4%
(B) 5.6%
(C) 7.2%
(D) 16.8%
Problem 2. Which is closest to the value of a bond described in The Wall Street Journal as 12s 2006? The current year 1998 and the appropriate interest rate is 10%. Assume that the bond matures in the same month that the quote is given, that interest payments are made once a year, and that an interest payment has just been made.
(A) $1,077
(B) $1,087
(C) $1097
(D) $1,107
Problem 3. Which is closest to the value of a consol paying $70 a year? The next payment is exactly 1 year away and the applicable interest rate is 11%.
(A) $637
(B) $930
(C) There is no way to tell without knowing the face value
(D) There is no way to tell without knowing the maturity date
Problem 4. A consol is selling at $1,200 with an interest rate of 5%. How much would this bond sell for if the interest rate were 8%?
(A) $200
(B) $750
(C) $1,650
(D) $1,920
Problem 5. Zeta Corporation has issued a $1,000 face value zero-coupon bond. Which is closest to the correct price for the bond if the appropriate discount rate is 4% and the bond matures in 8 years?
(A) $968
(B) $731
(C) $1,000
(D) $25.000
Problem 6. The formula Po = DIV/r represents:
(A) The present value of dividends in perpetuity.
(B) The value of a no growth dividend stream.
(C) A lower value than if a growth element was included.
(D) All of the above
Problem 7. LCP, a new formed medical group, is currently paying dividends of $.50.
These dividends are expected to grow at a 20% rate for the next 5 years and at a 3% rate thereafter. What is the value of the stock if the appropriate discount rate is 12%?
(A) $8.08
(B) $11.17
(C) $14.22
(D) $17.32
(E) $30.90
Problem 8. A corporate bond with a face value of $1,000 matures in 2 years and has a 10% coupon paid at the end of each year. The current price of the bond is $950. What is the yield to maturity for this bond?
(A) 7.69%
(B) 10.26%
(C) 10.52%
(D) 13.00%
Problem 9. Which is closest to the amount that should be paid for a stock that will pay a dividend of $10 one year from now and $11 two years from now? The stock will be sold in 2 years for an estimated price of $120. The appropriate discount rate is 9%.
(A) $114
(B) $119
(C) $124
(D) $129
Problem 10. The term structure can be described as the:
(A) Relationship of spot rates of interest and bond prices.
(B) Relationship of coupon rates and money rates.
(C) Relationship of spot rates of interest and maturity.
(D) Relationship of coupon rates and maturity