Problem 1. What are coupon payments, and what is a coupon rate?
Problem 2. Define the following terms: bond indenture, par value, principal, maturity, call provision, and sinking fund.
Problem 3. What does the term payout ratio mean?
Problem 4. A corporate bond is quoted at a price of 102. What is its dollar price?
Problem 5. What is interest-rate risk? How is interest-rate risk related to the maturity of a bond and to the coupon rate for a bond?
Problem 6. (Required return) According to the CAPM, what would be the required return on an asset that has a beta of 1.35 when the expected return on the market portfolio is 12% and the riskless return is 7%?
ISBN: 0-536-42875
Problem 7. (Required return) According to the CAPM, what would be the required return on an asset that has a beta of 1.25 when the expected return on the market portfolio is 12% and the riskless return is 5%?
Problem 8. (CAPM) The required return on an asset with a beta of 1.4 is 17% and the riskless return is 7%. What is the expected return on the market portfolio?
Problem 9. (CAPM) Stock A has a beta of 2.0 and a required return of 15%. The market return is 10%. What will be the required return on stock B, which has a beta of 1.4?