1.) The value of stock:

a. (category A) Increases as the dividend growth rate increases

b. Category A, B, C

c. (type C) increases as the required rate of return increases

d. Both Category a and b

e. (category B) Increases as the required rate of return decreases

2.) Specious Company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a 1000 face value; and the coupon interest rate is 9%. what is the estimated yield to maturity of the bonds at their current market price of 829?show solution

a. 8.20%

b. 14.80%

c. 10.86%

d. 13.10%

3.)What would be the current desired stock price of a share of Bowie corporation stock that pays a 2 dividend and will be worth 10 in 1 year? A 12% return on equity is required.show solution

a. 112

b. 110

c. 98.21

d. 100

4.)If treasury bills yield 4.0% and the market risk premium is 9.0%, then a portfolio with a beta of 1.5 would be expected to yield

show solution

a. 17.5

b.19.5

c. 9.0

d. 15.0

5.) Calculate the market price today of a P1000 bond which has 10 years until maturity and pays quarterly interest at an annual coupon rate of 12 percent. The required return on similar-risk bonds is 20 percent. show solution

a. 656.82

b. 835.46

c. 845.66

d. 2,201.08

6.) what happens to the annual price of a four-year, 1000 bond with an 8% annual coupon when interest rates change from 8% to 6%? show solution

a. A price increase of 57.07

b. A price decrease of P57.09

c. A price increase of P69.30

d. no change in price