1.Assume that a $1,000, 15 year, 8% bond is callable after 10 years at 104% of par value and the discount rate in todays market is 9%. Interest is paid semi-annually. Using the price-to-worst method, what is the value of this bond? A) $946 B) $986 C) $952 D) $1,086 E) $919

2.You own a 20 year bond and a 30 year bond, both of which are non-callable bond and pay a coupon of 7%. What is true about the change in value of your bonds if interest rate fall from 6% to 5%?

A) The value of the 30-yr bond will increase by $29.80 more than the 20-yr bond

B) The value of the 30-yr bond will decrease by $29.80 more than the 20-yr bond

C) The value of the 30-yr bond will increase by $35.25 more than the 20-yr bond

D) The value of the 30-yr bond will decrease by $35.25 more than the 20-yr bond

E) The value of the 30-yr bond will increase by $89.20 more than the 20-yr bond

3. Value a 5-yr, non-callable bond that pays coupons of 2% assuming market interest rates are 4%.

A) $1,000

B) $866

C) $953

D) $757

E) $910

4.Given the following information, calculate the present value of the following bond that pays semi-annual coupons. Coupon Rate: 8% Interest Rate: 5% Maturity: 14 years A) $1,299 B) $2,098 C) $1,175 D) $901 E) $851

5.If you bought a stock for $113 and sold it for $145 after a year, you also received a dividend of $5 in that year. What was the RETURN you received over the year? A) 32.7% B) 3.4% C) -5.7% D) 28.3% E) 25.5%

6.

Given the following information, calculate the firms beta:

Expected Return: 9%

Risk Free Rate: 6%

Market Return: 11%

Market Risk Premium: 5%

A) 1.80

B) 1.00

C) 1.74

D) 0.27

E) 0.60

7.What is the taxable-equivalent yield of the following municipal bond? Price:1000 Yield: 5% Federal tax rate: 40% Maturity: 10 years A) 5% B) 8.3% C) 12.5% D) 3% E) 2%

8.What is true about the excess return period?

A) A higher cost of capital will result in a company having a lower excess return period

B) The excess return period is the timeframe historically that a company was able to outperform the market

C) Strong economies of scale typically mean a lower excess return period

D) The intrinsic value of a company will be lower if it has a higher excess return period

E) It is the period in which a firm is able to earn returns on new investments that are greater than its cost of capital due to competitive advantage of the firm over others

9.

Which of the following is true about the dividend policy of a company?

A) A conservative dividend policy always gives investors dividends and higher stock price

B) The dividend policy of a company must change every year

C) The dividend policy of a company should not affect the future value of a stock

D) The dividend policy should not affect the current value of a stock

E) Companies investing heavily in new projects typically pay a higher dividend