1. Which of the following is correct regarding the payback period?
A That it adjusts for uncertainty of later cash flow is its advantage.
B That it favors short-term project is its disadvantage.
C That it ignores time value of money is its advantage.
D That it requires an arbitrary cutoff point is its advantage.
E None of the above
2. Consider a 2-year 5% treasury note with face value $1,000 that pays semi-annual coupon. What is the maximum price you are willing to pay for it if the yield-to-maturity is 4%?
A $981.19
B $1000
C $1018.86
D $1019.04
E None of the above
3. You paid $957,3 for a 5% 5-year bond, which has a face value of $1000 and pays coupons twice each year. What is the yield-to-maturity? Choose the closest answer
A 2%
B 3%
C 4%
D 5%
E 6%
4. A bond matured in 15 years has a current yield of 8.35%. The face value is $1000 while the selling price is $1197.93. What is its coupon rate if it pays semi-annual coupon payments?
A 4.18%
B 5.00%
C 8.35%
D 10%
E None of the above
5. If you want to increase your purchasing power by 5%, what is the required nominal rate when the inflation rate is 3%?
A 3.0%
B 5.0%
C 8.0%
D 8.2%
E 15.0%
6. High Country Builders currently pays an annual dividend of $1.35 and plans on increasing that amount by 2.5 percent each year. Valley High Builders currently pays an annual dividend of $1.20and plans on increasing its dividend by 3 percent annually. Given this information, you know for certain that the stock of High Country Builders' has a lower _______ than the stock of Valley High Builders
A market price
B dividend yield
C capital gains yield
D total return
E The answer cannot be determined based on the information provided