1. A Zero-coupon bond with maturity of 5 years is trading at the 78.15 per 100 face value. How much is the yield to maturity for the bond. A. 27.96% B. 5.05% C. 7.38% D. 6.24% 2. Suppose ABC plc will pay a dividend of 55p at the end of this year and 75p per share next year. You expect ABC's stock price to be 500p in two years. If ABC' cost of equity capital is 10%, what price would you be willing to pay for a share of ABC ' stock today if you planned to hold the stock for two years? (to the nearest penny) A. 525p B. 475p C. 475p D. 520p 3. A government bond will pay 3.05 per annum in perpetuity. If the first payment is made at the end of year 5 and the cost of debt is 5%, what is the current market value of the bond? A. 100.00 B. 61.00 C. 50.18 D. More information is needed to obtain the current value of the bond. 4. Consider a 20 -year, 100 coupon bond with 8% annual coupons. What is the effect on the bond value if its YTM increases from 6% to 7% ? A. There is no change in bond value. B. The bond value will decline from 122.94 to 110.59. C. The bond value will rise from 110.59 to 122.94. D. It is impossible to answer this question due to lack of information. 5. Which of the following is NOT usually a characteristic of equity finance of a company? A. Equity finance is considered the permanent capital B. Ordinary shareholders have voting rights C. Cost of equity finance is usually lower than debt finance because companies are not legally bound to pay dividends D. Cost of equity finance is usually higher than debt finance due to higher risk associated with equity markets