answers. with short solution

9.

Assume you have a bond with a coupon rate of 8% and coupons paid annually. The par value is $1,000 and the bond has 4 years to maturity. The yield to maturity is 10%. What is the value of a bond?

Select one:

a. $1,063.40

b. $979.25

c. $1,010

d. $936.60

10.

ABC Company has 100,000 shares of stock outstanding with a market price of $30 per share. If net income for the year is $600,000 and the retention ratio is 80%, what is the dividend per share on the firm's stock?

Select one:

a. $2.25

b. $1.20

c. $2.00

d. $1.50

11.

ABC Company needs $2 million for buying a new heavy-duty equipment. How much can be paid out as dividends if net income is $1,550,000 and target capital structure D/E = 1/3?

Select one:

a. $50,000

b. $75,000

c. $60,000

d. $45,000

12.

Assume you think a boom and a recession are equally likely to happen, a 50-50 chance of either.

State of Economy	Probability of State of Economy	Security Returns if State Occurs
		Security L	Security U
Recession	0.50	-20%	30%
Boom	0.50	70%	10%

Based on the above information, what is expected return on stock L?

Select one:

a. 18%

b. 20%

c. 22%

d. 25%

13.

Assume ABC Company just paid a dividend of $1.00. ABC is planning to increase its dividend by 3% per year from now on. If the market requires a return of 22% on assets of this risk, how much should the stock be selling for?

Select one:

a. $7.42

b. $5.00

c. $10.42

d. $5.42

14.

You were lucky to find an investment that provide a return of 6%. Because this rate is acceptable to you, you decided to invest $10,000. How much will you have in 5 years?

Select one:

a. $13,382.26

b. $15,382.25

c. $12,333.23

d. $13,982.33

15.

Assume ABC has the average inventories $2,000,000 and COGS is $8,500,000. What is the Inventory Conversion Period?

Select one:

a. 175.75 days

b. 4.25 days

c. 85.88 days

d. 77.65 days