A. Company ABC has just issued the following bond.

Face value: $1000

Coupon Rate: 8%

Time to maturity: 10 years

Yield to maturity: 10%

How much are you willing to pay for this bond if the coupon is paid annually?

631.33

1000

1,134.20

877.11

B. How much are you willing to pay for this bond if the coupon is paid semi-annually?

829.73

631.33

857.38

489.19

C.

Company XYZ just paid $2.00 dividend. You believe that the dividend will grow by 5% per year forever.

If you require 10% return on this investment, what is the stock price?

		20
		21
		42
		40

D. How would your answer if you hold the stock for 2 years and then sell it for $30.

		28.34
		28.52
		31.18
		31.38

E. Youd like to invest in Apple Inc. (AAPL). You look at Yahoo Finance and youll see the beta of Apple is 1.45.

If risk free rate is 3% and the expected return on S&P500 (market) is 9%, what is your expected rate of return to invest in Apple Inc.?

		7.35%
		8.7%
		11.7%
		16.05%

F. Assume the real expected return of Apple Inc. is 18%. Is Apple Inc. overvalued, undervalued or correctly valued?

		Not enough information to decide
		Undervalued
		Correctly valued
		Overvalued