Answers only please

QUESTION 1

1. Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below.

Bond X Bond Y

Face value $1,000 $1,000

Annual Coupon Payment $120 $130

Payment Frequency Semiannual Annual

Years to maturity 15 15

Price $890.04 ?

What is the price of bond Y?

1. A.$940.92
2. B.$989.75
3. C.$956.95
4. D.$1,007.15
5. E.$925.88
6. F.$973.44

5 points

QUESTION 2

1. You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.25 percent and the inflation premium is 3 percent.US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form.
2. A.6.35%
3. B.5.83%
4. C.5.58%
5. D.5.32%
6. E.6.09%
7. F.5.06%

5 points

QUESTION 3

1. Last year, Jen and Berry Inc. had sales of $55,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Thirty percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year?
2. A.$13,250
3. B.$14,250
4. C.$10,636
5. D.$12,667
6. E.$12,000
7. F.$11,500

5 points

QUESTION 4

1. The Bank of Loans uses the following rating scheme to classify the riskiness of its customers.

Risk ClassRisk Premium (%)

Prime .05

High grade 1.0

Upper medium grade 1.5

Lower medium grade 2.0

Speculative: Non-investment grade 4.0

Speculative: Highly 6.0

Substantial risks 9.0

Extremely speculative 12.0

The bank's pure rate of interest is 1.5% and the inflation premium is 3%.

What rate would the bank offer a customer who is in the upper medium grade risk class?

1. A.8.73%
2. B.6.64%
3. C.6.11%
4. D.8.20%
5. E.7.16%
6. F.7.68%

5 points

QUESTION 5

1. How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is $1,400?
2. A.$218,080
3. B.$249,235
4. C.$202,503
5. D.$233,658
6. E.$264,812
7. F.$186,926

5 points

QUESTION 6

1. You are 20 years old and plan to retire with $1,000,000. You have $32,500 available for investment now.You deposit this into an account that pays 10.25% interest compounded annually? How old will you be when the account has the target amount? (Answers are rounded.)
2. A.61
3. B.63
4. C.57
5. D.59
6. E.55
7. F.65

5 points

QUESTION 7

1. Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7, and $10 for the years 8-10.Thereafter, starting in year 11, the company will pay a constant dividend of $6/year forever.If you require 14 percent rate of return on investments in this risk class, how much is this stock worth to you?
2. A.$55.99
3. B.$50.50
4. C.$34.54
5. D.$41.46
6. E.$37.77
7. F.$45.68

5 points

QUESTION 8

1. A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is $1,000. Which of the following is true:

I. Its YTM is 10%.

II. Bond's coupon rate is 10%.

III. The bond's market quote is 95.70. (Note: Market quote is the market price as a percent of the face value.)

1. A.I, IIIOnly
2. B.I, IIOnly
3. C.I, II, and III
4. D.IIIOnly
5. E.IOnly
6. F.II, IIIOnly

5 points

QUESTION 9

1. What is the sum of the present values of the following cash flows at 11 percent annual rate of return? (Hint: Calculate the PV of each cash flow and add or subtract depending on the sign of the cash flow.)
3. Year012345Cash Flow-750450350150125-100
4. A.60.27
5. B.26.33
6. C.37.37
7. D.72.15
8. E.48.68
9. F.15.56

5 points

QUESTION 10

1. Riverhawk Corporation has a bond outstanding with a market price of $1,050.00.The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%.What is the bond's coupon rate?
2. A.9.77%
3. B.13.61%
4. C.12.08%
5. D.12.84%
6. E.10.54%
7. F.11.31%