QUESTION $14$

Nut and Bolt Guy, Inc.$\text{'}$s stock carries an expected return of $15\%.$ The firm will pay a $$4\mathrm{.}2$ dividend next year.

After year $1,$ the dividend is expected to grow by $7\%$ percent for years $2$ and $3.$ The firm expects the dividend to grow by $4\%$ after year $3.$

Given this information, what is the intrinsic value of the stock?

$$37\mathrm{.}7$

$$42\mathrm{.}4$

$$51\mathrm{.}7$

$$40\mathrm{.}1$

$10$ points

QUESTION $15$

I own a portfolio of fixed$-$rate bonds. Suddenly, interest rates increase.

What impact will this have on my bond portfolio?

I will have a loss of coupon interest

I will have a gain in coupon interest

I will have a capital loss

I will have a capital gain

$10$ points

QUESTION $16$

Bean Bliss Co$.,$ the top global java retailer, foresees lower bean costs and higher margins soon.

What's the most logical options trade for an expected profit?

Buy call options

Buy Put options

Sell a call option

$10$ points

QUESTION $17$

An agreement that represents the right, but not the obligation to sell an asset at a predetermined price on or before the expiration date of the contract is a $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

Straddle

Bond Spread

Put Option

Call Option

$10$ points

QUESTION $18$

Compared to a $10-$year duration bond, a $3-$year duration bond will likely have $\_\_\_\_.$

Higher amount of interest rate risk

Lower amount of interest rate risk

Lower yield volatility

Lower coupon rate

$10$ points

QUESTION $19$

If a firm's debt to equity ratio significantly declined, what would likely happen to their bond spread?

Spread should get smaller or "tighten"

Spread should get larger or "widen"

No change: Spreads are not impacted by Credit Ratings

$10$ points

QUESTION $20$

Let's say you ran a DDM model on Nike and your intrinsic value is $$122.$ The stock is currently trading at $$102.$ Assuming you trust your inputs into the DDM model, what action is reasonable for you to take as an investor?

Do nothing

Buy shares in NKE because you feel that it is undervalued

Buy put options in NKE because you think the stock is overvalued

$10$ points

QUESTION $21$

In a candlestick chart, what does a long lower shadow $($or wick$)$ typically indicate?

Strong buying activity

Strong selling pressure that was ultimately rejected$/$reversed

Signs of a balanced market $($between buyers and sellers$)$

Lower than normal trading volume