Personal Finance Exam Questions Part 2

QUESTION 14

What is the market price of a 1,000, 10 percent bond if comparable market interest rates drop to 8 percent and the bond matures in 20 years?

QUESTION 15

Marry wants to help pay for her grandchild's education. How many years will it take her to reach her goal of 30,000 if she invests 1,000 per year, earning 6 percent?

QUESTION 16

Jim decided to allocate his investments evenly between two stocks. If the first has a beta of 1.2 and the second has a beta of 0.9, what rate of return can Jim expect if the stock market increases by 7% next year?

INFORMATION FOR QUEST 17 AND QUESTION 18

The P/E ratio for Stock CPPQ is 24 and current earnings per share is $6. Management expects earnings to grow 6% per year and the current P/E ratio of 24 is excpected to remain stable.

QUESTION 17

Based on management prediction, what can you expect the price of Stock CPPQ to be in 3 years?

QUESTION 18

What will the EPS share be in 3 years?

INFORMATION FOR QUESTIONS 19 - 22

For questions 19 - 22, all bonds have a face value of $1,000 and payments are assumed to be semi-annual.

QUESTION 19

What is the current yield of a corporate bond maturing in 20 years with a coupon rate of 5.9% and a market price of $940.

QUESTION 20

What is the yield to maturity of a coproate bonds maturing in 6 years with a coupon rate of 5% and a market price of $925?

QUESTION 21

What is the market price of a $1,000, 25-year 7% bond if current interest rates are 6.1%?

QUESTION 22

What is the yield to maturity of a zero-coupon corporate bonds (it pays no interest) maturing in 10 years with a market price of $650?

QUESTION 23

Based on text estimate, what is the fair price for a $1,000,000 term life insurance policy for a 45 year old female who smokes?

INFORMATION FOR QUESTION 24 - 26

Bob recently had a surgery. His total bill for this event, which was his only health care expense for the year, came to $9,890. His health insurance plan has a $500 deductible and an 80/20 coinsurance provision. the cap on Bob's coinsurance share is 2,000.

QUESTION 24

How much will Bob pay?

QUESTION 25

How much of the bill will be paid by Bob's insurance?

QUESTION 26

Now assume the actually bill was $13,890 (not $9,980). How much will Bob pay?