Question 1. Bond's par value- $1,000 pays coupons Semi-annually and matures in 16 years. Coupon Rate is 8% Coupons are paid semi annually. Price of Bond= $666.65. What is yield to maturity of bonds?
A. 6.5%
B. 14.5%
C. 13%
D. 8%
Question 2. Common stock pays dividends at the end of 5 years of $4.10 expected to grow at rate of 2.8% forever. Required rate of return is 15.7%. At what price can stock be sold immediately after receiving the dividend?
A. $32.67
B. 37.51
C. 29.39
D. 26.11
Question 3. Standard deviation of probability distribution?
Return -17% 19% 25%
Probability .35 0.5 0.15
a. 16.07%
b. 17.95%
c. 17.05%
d. 18.04%
Question 4. Required rate of return for a common stock using capital asset pricing is 17.8%, risk free rate of 7.12, rate of return 12.5%. What is beta?
a. 1.49
b. 1.42
c. 1.00
d. 1.99
Question 5. Investment bought for $1,000 and sold year later for $1150 after receiving dividends of $120 at end of year. What is the rate of return earned?
a. 11.00%
b. 15.00%
c. 3.00%
d. 27.00%
Question 6. Common stock to pay dividends of $3.20, $5.30, $4.00, $4.10 at end of next four years respectively. Dividends grow at rate of 3.5% forever. Required rate of return is 14.2%. What is the price of stock?
a. $39.66
b. 35.28
c. 38.99
d. 43.90
Question 7. Bonds Par Value of $3000 matures in 12 years. Coupon rate is 11%. Required rate of return is 9.83%. What is the price of Bond?
a. $3,326.54
b. $3,251.54
c. $2,772.12
d. $3,241.17
Question 8. Firm to purchase free cash flows at $3.20, $5.30 and $4.10 million at end of next 3 years. Grow 2.4% cash flow forever. Weighted average cost of capital is 16.2% value.
a. 0.07
b. 28.68
c. 30.42
d. 34.62
Question 9. Firm purchased an asset two years ago for $118,000 and spent another $34,000 installation expenses. Asset falls within the five year macrs class for depreciation purposes. Tax rate 40%. What is the amount of taxes paid if asset is sold for $63,000?
Question 10. Firm estimating terminal cash flows for project involving acquisition of machine. Machine sold $31,000 at end of life 3 years from today. Additional working capital of $24,000 required. Machine purchased $158,000 and $18,000 install expense. What is terminal cash inflow for project if tax rate is 40% and machine in 5 year macrs?
Question 11. Beta can be negative
True or False?