1. What is the price of a bond with a face value of $100, yield to maturity of 7% and coupon rate of 5%? The bond has 10 years to maturity.

Select one:

a. $85.79

b. $104.98

c. $90.54

d. $81.35

e. $102.33

2. Which of the following investments has the highest return?

1. Investment One: 12% p.a. compounding continuously

2. Investment Two: 13.00% p.a. compounding semi-annually

3. Investment Three: 13.50% p.a. compounding annually

4. Investment Four: 12.75% p.a. compounding monthly

Select one:

a. The highest return is from Investment Two since it returns 13.42%

b. The highest return is from Investment Four because the effective return is the highest

c. The highest return is from Investment Three because it has the highest rate of 13.5% of all four investments

d. The highest return is from Investment One since it is compounded continuously

3.

The share of a Copper Tech is currently $180. You are aware that its current dividend is $5.00 (D0) per share with a growth rate of 2.5% (g). The required return is 5% (R). What is your recommendation on the share?

Select one:

a. The share is overpriced, so buy it.

b. The share is underpriced, so buy it.

c. The share is overpriced, so sell it.

d. The share is underpriced, so sell it.

4.

What is the present value of $10,000 received every year for 6 years? The interest rate is 4.50% p.a. and you receive the first payment in one year.

Select one:

a. $72,414.62

b. $51,578.83

c. $60,000

d. $38,203.51

5.

You are the manager of a supplement store which specialises in selling organic protein powder. You sell 8,000 tubs per year. The total cost of placing an order is $130 and it costs $20 to hold a tub of protein for a year.

What is the economic order quantity and the number of orders per year required?

Select one:

a. Approximately 50 tubs per order, 160 order per year

b. Approximately 8000 tubs per order, 1 order per year

c. Approximately 82 tubs per order, 548 orders per year

d. Approximately 100 tubs per order, 80 orders per year

e. Approximately 322 tubs per order, 25 orders per year

6.

Cortex had a beta of 1.2 at a time when the risk free rate was 5% and the market was returning 7%. What was the expected return of Cortex?

Select one:

a. 7.4%

b. 7.6%

c. 2.4%

d. 7.0%

7.

What is the present value of $5,000 received every year forever? The interest rate is 7 percent p.a. and the first payment is received in five years.

Select one:

a. $50,927.58

b. $71,428.57

c. $54,492.52

d. $7,012.76

8.

According to Miller and Modiglianis proposition, which assumptions are necessary for capital structure decisions to be irrelevant to the value of the firm?

Select one:

a. The assumption that investors never sell or buy shares or bonds

b. Dividends, projects, and new capital do not matter in reality

c. The assumption that a company always maximises the value of the firm

d. Taxes, information costs, transaction costs and investment policy are irrelevant

e. That debt and equity have the same costs; therefore, it does not matter which is used to fund the firm