Question 1 (1 point)

What is the maximum you should be willing to pay for the right to receive $500 a month forever if the quoted annual interest rate (APR) is a constant 15%?Round your answer to the nearest dollar.

Question 1 options:

$40,000

$49,383

$57,500

none of the above

Question 2 (1 point)

Immunization is the strategy of protecting a bond portfolio from interest rate risk. True or false?

Question 2 options:

True

False

Question 3 (1 point)

A mortgage bond is more secure than a debenture. True or false?

Question 3 options:

True

False

Question 4 (1 point)

If the effective annual yield on a bond is equal to the bond's coupon rate, the bond will have a market value that is

Question 4 options:

Either A or B may be true

equal to the principal value of the bond

below the principal value of the bond

above the principal value of the bond

Question 5 (1 point)

Nancy has built a very profitable business, and she credits the entrepreneurship program at her alma mater for a lot of her success.She would like to donate money to her old school to help one worthy graduate each year establish his or her own business.She will donate the money today, with the understanding that the first award will go to a graduate of this year's freshman class.(That is, the first award will be made four years from now.)Her alma mater is able to invest the funds at a constant, annual, tax-free rate of 12%.How much must her donation be if she would like for the annual award to be $10,000 a year and wants the program to continue forever, even after she is no longer around?Round your answer to the nearest dollar.

Question 5 options:

$83,333

$93,333

$52,960

$59,315

Question 6 (1 point)

The following lists the primary advantages of bonds, EXCEPT FOR:

Question 6 options:

Share in the profits of the company

Good source of current income

In case of default bondholders are paid before shareholders

Relatively safe

Question 7 (1 point)

The higher the rating the lower the yield of the bond. True or false?

Question 7 options:

True

False

Question 8 (1 point)

The difference between the cost of the zero-coupon bond and its value when redeemed is the investor's return. True or false?

Question 8 options:

True

False

Question 9 (1 point)

Bond analysis is both quantitative and qualitative. True or false?

Question 9 options:

True

False

Question 10 (1 point)

If you accumulate $800,000 in your retirement account and can earn a constant annual rate of 5% on this money after retirement, how much will you be able to live on each year if you expect to live for 30 years after retirement?Assume that you will make your first withdrawal at the end of one year, and round your answer to the nearest dollar.

Question 10 options:

$27,922

$28,000

$18,510

$52,041

Question 11 (1 point)

Newbie Business Center has borrowed $12,000 from its bank.The loan is for three years and requires the firm to make equal monthly payments of $398.57.Each payment is comprised of both interest and principal repayment, and the payments will begin one month after the loan agreement.What effective annual rate is the bank charging Newbie for this loan?Round your answer to the nearest tenth of a percent.

Question 11 options:

12.0%

12.7%

10.1%

1.0%

Question 12 (1 point)

The quantitative analysis of bonds does not include the financial ratios. True or false?

Question 12 options:

True

False

Question 13 (1 point)

Decline, Inc. currently produces cash flows of $650,000 a year.However, these cash flows are expected to decline by 1% a year indefinitely.If Decline's cost of equity capital is 8%, what is its current market value?

Question 13 options:

$7,222,222

$9,193,000

$ 7,150,000

$9,286,000

Question 14 (1 point)

A certain stock currently pays a dividend of $1.80 and is selling for $49.50.If the required rate of return on this stock is 14%, what is the implied expected dividend growth rate?Round your answer to the nearest tenth of a percent

Question 14 options:

9.8%

10.4%

8.2%

none of the above

Question 15 (1 point)

The earnings per share of Erratic Corporation are projected to be as follows:

End of YearEarnings

1$1.10

2$1.15

3$1.18

4$1.20

After year 4, earnings are expected to grow at a constant rate of 6% indefinitely.If the required rate of return is 12%, what would you estimate the value of Erratic's stock to be?Round your answer to the nearest dollar.

Question 15 options:

$12

$13

$16

$17

Question 16 (1 point)

Stable Corporation currently pays a dividend of $0.50 a share.The firm's dividends are expected to grow at a constant rate of 10% indefinitely.If investors require a 15% return on Stable's stock, at what price should it sell?

Question 16 options:

$5.00

$10.00

$11.00

$11.50

Question 17 (1 point)

Promises, Incorporated has issued a 10-year, semiannual, level-coupon bond that has a coupon rate of 18%.The bond is priced to offer an effective annual rate (i.e., true yield) of 14% and sells for $1,212 per $1,000 of principal value.How much interest will this bond pay every six months (per $1,000 of principal value)?

Question 17 options:

$70.00

$90.00

$109.08

$84.84

Question 18 (1 point)

Calculate the monthly payment due on a 30-year, fixed-rate, $80,000 mortgage if the quoted interest rate is 6%.Round your answer to the nearest cent

Question 18 options:

$133.31

$581.19

$287.83

$479.64

Question 19 (1 point)

A project is expected to produce a cash flow of $10,000 next year.This is expected to grow at a rate of 25% for the following two years before slowing down to an estimated eternal growth rate of 5% a year.If you require a 15% return on this project, what is the maximum amount you should be willing to invest in it?Round your answer to the nearest dollar.

Question 19 options:

$164,063

$182,224

$136,295

$143,750