1A points, 1 points each a for each of the following. Put your answer in the column to the right. stock A has high rist. Stock 8 has lowe nisk. All else equal, which one has the higher required retum? Both A and 8 took out 30-year mortgages. A had a payment of $2000. B had a payment of $2200. A Both A and B took out 30-year mortgages. A paid his off in 28 years. B paid hers off in 25 years. All else 18. else equal, who borrowed more money? 19. equal, who paid more interest? Investment A has a quarterly interest rate of 3%. Investment B has a monthly interest rate ol 1% which investment has the higher EAR? Investment A and B both pay interest of 5% per year. Investment A interest compounds quarter. Investment B interest compounds semi-annually. You plan to invest for 5 years, which is the better investment? Investment A has a future value of $600. Investment B has a future value of $500. Both have the same present value. All else equal, which one has the higher interest rate? Bond A is a BBB bond, Bond B is a AAA bond. All else equal, which one will have a higher yield to maturity? Bond A is a par bond and Bond B is a discount bond. All else equal, which bond has the higher coupon 21. 2 23. 24. rate? 25. maturity? 2 27. Bond A is a municipal bond and Bond B is a corporate bond? Which bond should have the higher yield to Bond A makes semi-annual interest payments of $30. Bond B makes an annual payment bonds have a yield of 5%, which bond has a higher price? of $50. Both Bond A is not callable, Bond B is callable. All else equal, which one is more risky? is a corporate bond. If you pay a very low tax rate, which bon All else equal, which one will have th both sto Bond A is a municipal bond and Bond B most likely to be the better choice? 28 is an annuity. 2 Investment A is an annuity due 29. and Investment B is an annuity. Stock A has a holding period return of 10%. Stock B has a holding period return of have a fair return of 9%, which stock should you short? higher present value? Part 3, Risk Classification, 3 points, 1 points each Classify each of the following as systematic (S) or unsystematic (U) and determine whether the info change in prices by indicating one of the following: increase (), decrease (D). if you wouild like to you may do so in the space below the table 31. Waste te Management announces a 9.4% increase in its dividend. it is likely to pass the tax bll which will lower the top Walt Disney Co.'s The Last Jedi' opens with $220 million in ticket sales whi best weekend of all-time. 32. Congress announces that tax rate from 35% to 21%. 3
