1. Boyes Industrial bonds pay coupons semiannually and have a maturity of 8 years with a $1,000 face value and a 8% coupon. Boyd's bonds are callable in 5 years at face value. These bonds currently sell at a price of $1,125. What is their yield to call (YTC)?

Select one:

a. 5.13%

b. 6.28%

c. 5.93%

d. 2.57%

e. 3.00%

2. Which of the following is true?

I. The dividend discount model seeks to find the present value of expected dividends as a basis of stock value.

II. The estimate of stock value derived from application of the dividend discount model is in large part dependent on the expected growth rate in dividends per share.

III. The corporate valuation model is a valuation model that arrives at stock valuation by finding the present value of expected free cash flows.

IV. The earnings multiples approach to stock valuation is rooted in the relative price of the stock to current earnings multiplied by future earnings per share.

V. The rate of return earned on equities is a function of the sum of one's dividend yield and capital gain or loss yield.

Select one:

a. I, III & V

b. I, III, IV & V

c. I, II, III, IV & V

d. I, II & V

e. I, II, IV & V

4. 5-year Treasury bonds yield 7.4%. The inflation premium (IP) is 3.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.4%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*?

Select one:

a. 3.10%

b. 3.90%

c. 3.50%

d. 3.77%

e. 5.13%