1.Jill wants to buy 4-year zero coupon bonds with a face value of $1,000. Her required return on the bonds is 6.3 percent p.a. Assuming annual compounding, what would Jill be prepared to pay for the bond? ( to the nearest cent )

Select one:

a. $783.19

b. $879.55

c. $975.91

d. $1024.48

2.Which ONE of the following statements is true?

Select one:

A. The longer the maturity of a bond, the greater its interest rate risk.

B. The longer the maturity of a bond, the less its interest rate risk.

C. The higher the coupon rate, all else equal, the higher the interest rate risk.

D. Zero coupon bonds have lower interest rate risk than coupon paying bonds, all else equal.

3.Zero coupon bonds sell well below their face value because

Select one:

A. They are high risk

B. They don't offer any collateral

C. They don't pay coupons

D. Regulators have banned them.

4.The market for corporate bonds is characterized by

Select one:

A. Trades that are in large blocks

B. An over the counter market

C. A small number of daily trades

D. All of the above

5. Techworld is expecting to pay out a dividend of $6.77 next year (year 1). After that it expects its dividend to grow at 4 percent per annum for the next five years (for years 2 to 6). What is the dividend that is expected to be paid in year 5? (to nearest cent; dont include $ sign)

6.Suppose an investor earned a yield of 13.0 percent p.a on a bond paying coupons twice a year. What is the effective annual yield (EAY) on this investment? (answer as a percentage rounded to two decimal places without % sign. eg 2.889% would be written 2.89)

7.ABC Limited has a stable sales track record but does not expect to grow in the future. Its last annual dividend was $3.92. If the required rate of return on similar investments is 17 percent p.a., what is the current share price? (to the nearest cent; don't use the $ sign)

8.A company has just paid its annual dividend of $3.49 yesterday, and it is unlikely to change the amount paid out in future years. If the required rate of return is 18 percent p.a., what is the share worth today? (to the nearest cent; dont include $ sign)

9.To fund a project, a company will issue 9-year zero coupon bonds with a face value of $1,000. Assuming annual coupons to be the norm, what will be the price of these bonds if the appropriate yield is 10.7 percent p.a.? (Round to the nearest dollar; do not use $ sign or commas)

10.ABC Ltd is expected to grow its annual dividend at a constant rate of 3 percent. If the companys next dividend is $3.46 and its current price is $26.39, what is the annual required rate of return on this share? (As a percentage to two decimal points; don't show the % sign eg 2.875% would be entered as 2.88.)