QUESTION 1

1. All else equal, which of the following bonds carries the greatest amount of interest rate risk?
2. 0%coupon
3. 5% coupon
4. 10%coupon
5. 20%coupon

3 points

QUESTION 2

1. If a bond's coupon rate is more than its yield to maturity, then the bond will sell:
2. at a price equal to its face value.
3. at a price greater than its face value.
4. at a price less than its face value.
5. at a price either less than or greater than its par value.

4 points

QUESTION 3

1. Future value is a measure of:
2. what one or more cash flows are worth at the end of a specified period.
3. what one or more cash flows received in the future is worth today.
4. the value of an investment after subtracting interest earned on it for one or more periods.
5. the value of an investment's worth today.

5 points

QUESTION 4

1. Friendly Airlines stock is currently selling for $40.00 per share.If the stock pays a dividend of $2.00 and the stock price in one year is $44.00, what is the total return on the stock?
2. 5%
3. 10%
4. 15%
5. 20%

4 points

QUESTION 5

1. Which one of the following statements about vanilla bonds is NOT true?
2. The coupon payment is fixed.
3. The face value,or par value,is usually$1,000.
4. The coupon rate is fixed.
5. The coupon rate is calculated as the annual coupon payment multiplied by the face value.

4 points

QUESTION 6

1. Which of the following investment classes had the largestvariability in returns based on thehistorical dataintheclassnotes?
2. Small US stocks
3. Large US stocks
4. Short-term governement bonds
5. Long-termgovernment bonds

5 points

QUESTION 7

1. All else equal, which of the following bonds carries the greatest amount of interest rate risk?
2. 1-yearmaturity
3. 5-yearmarurity
4. 10-yearmaturity
5. 30-yearmaturity

4 points

QUESTION 8

1. If your investment pays the same amount at the endof each year for a period of six years,the cash flow stream is called:
2. a perpetuity.
3. an ordinary annuity.
4. an annuity due.
5. a growing perpetuity.

4 points

QUESTION 9

1. Which of the following investment classes had the largestaverage return based on thehistorical datainthe classnotes?
2. Small US stocks
3. Large US stocks
4. Short-term goverment bonds
5. Long-term government bonds

5 points

QUESTION 10

1. You currently own a 5-year bond with a face value of $1,000 and a coupon rate of 10 percent with annual payments. The bond is currently worth $832.39. If market interest rates remain unchanged, what will be the value of the bond when there are only 4 years left until maturity?
2. $832
3. $857
4. $957
5. $1,000

3 points

QUESTION 11

1. You are interested in investing a $10,000 gift from your grandparents for the next four years in a mutual fund that pays 8 percent annually.What will your investment be worth at the end of four years?
2. $10,800
3. $13,605
4. $14,200
5. $15,215

4 points

QUESTION 12

1. If the risk-free rate of return is 3 percent and the market risk premium is 6 percent, what is the expected return on a stock with a beta of 1.8 according to the CAPM?
2. 8.40%
3. 10.80%
4. 13.80%
5. 19.20%

4 points

QUESTION 13

1. What is the expected return on a portfolio comprised of$5,000investedin stock A and$5,000investedin stock B(in percent)?
2. STATEPROBABILITYRETURN%(A)RETURN%(B)Boom0.503050Normal0.501010

3 points

QUESTION 14

1. Your financial advisor recommends you invest in a 25-year bond with a face value of $1,000 and an annual coupon of 10 percent.If current yield to maturity is 10 percent per year, what is the value of this bond?
2. $1,000
3. $2,500
4. $25,000
5. $250,000

4 points

QUESTION 15

1. Myers, Inc. will be making annual loan payments of $3,895.50 for a 10-year period starting at the end of this year.If the interest rate is 9 percent, what is the present value of this annuity?
2. $23,250
3. $25,000
4. $29,000
5. $30,250

4 points

QUESTION 16

1. Jackson Electric Company has borrowed $27,850 from its bank at an annual rate of 8.5 percent.The company plans to repay the loan in eight equal installments.What is the annual loan payment?
2. $4,708
3. $4,748
4. $4,939
5. $5,134

4 points

QUESTION 17

1. The process of converting a present value into a future value is called:
2. annualizing.
3. discounting.
4. compounding.
5. capital budgeting.

5 points

QUESTION 18

1. Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment that pays 12 percent annually.How much money will he have at the end of the six years?
2. $21,000
3. $24,670
4. $26,124
5. $28,403

4 points

QUESTION 19

1. Suppose you invest$5,000in Stock A and$5,000in Stock B.The variance of Stock A is50percent,the variance of Stock B is also50percent,and the covariance between the two stocks is0percent.What is thestandarddeviationof your portfolio (in percent)?

3 points

QUESTION 20

1. Jenny Clayton is looking to invest in some 5-year bonds that pay annual coupons of 6.25 percent on a face value of $1,000 and are currently selling for $588.79.What is the yield to maturity on these bonds?
2. 5 percent
3. 10 percent
4. 15 percent
5. 20 percent

3 points

QUESTION 21

1. Downward-slopping yield curves are usually observed
2. when the economy is growing quickly.
3. before the beginning of a recession.
4. always.
5. never.

4 points

QUESTION 22

1. If the interest rate is positive, then the present value of multiple cash flows is:
2. greater than the sum of the cash flows.
3. equal to the sum of the cash flows.
4. less than the sum of the cash flows.
5. higher or lower than the sum of the cash flows depending on the interest rate.

5 points

QUESTION 23

1. The three economic factors that affect the shape of the yield curve are:
2. the real rate of interest, the expected rate of inflation, and marketability.
3. the real rate of interest, the expected rate of inflation, and interest rate risk.
4. the nominal rate of interest, the expected rate of inflation, and default risk.
5. the real rate of interest, the nominal rate of interest, and currency risk.

4 points

QUESTION 24

1. Anna Strong will receive a single payment of $15,000 from a bank deposit in 5 years at an interest rate of 3.5 percent.The payment of $15,000 represents the:
2. present value of an annuity
3. future value of an annuity
4. present value
5. future value

4 points

QUESTION 25

1. Which of the following investments will result in the highest future value?
2. $1,000 invested at 10% compounded annually for 5 years.
3. $1,000 invested at 10% compounded quarterly for 5 years.
4. $1,000 invested at 10% compounded monthly for 5 years.
5. $1,000 invested at 10% compounded continuously for 5 years.

4 points

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QUESTION 1 1. All else equal, which of the following bonds carries the greatest amount of interest rate risk? 0% coupo n 5% coupon 10% coup on 20% coup on 3 points QUESTION 2 1. If a bond's coupon rate is more than its yield to maturity, then the bond will sell: at a price equal to its face value. at a price greater than its face value. at a price less than its face value. at a price either less than or greater than its par value. 4 points QUESTION 3 1. Future value is a measure of: what one or more cash flows are worth at the end of a specified period. what one or more cash flows received in the future is worth today. the value of an investment after subtracting interest earned on it for one or more periods. the value of an investment's worth today. 5 points QUESTION 4 1. Friendly Airlines stock is currently selling for $40.00 per share. If the stock pays a dividend of $2.00 and the stock price in one year is $44.00, what is the total return on the stock? 5% 10 % 15 % 20 % 4 points QUESTION 5 1. Which one of the following statements about vanilla bonds is NOT true? The coupon payment is fixed. The face value, or par value, is usually $1,000. The coupon rate is fixed. The coupon rate is calculated as the annual coupon payment multiplied by the face value. 4 points QUESTION 6 1. Which of the following investment classes had the largest variability in returns based on the historical data in the class notes? Small US stocks Large US stocks Short-term governement bonds Long-term government bonds 5 points QUESTION 7 1. All else equal, which of the following bonds carries the greatest amount of interest rate risk? 1-year matur ity 5-year marur ity 10-year mat urity 30-year mat urity 4 points 1. QUESTION 8 If your investment pays the same amount at the end of each year for a period of six years, the cash flow stream is called: a perpetuity. an ordinary annuity. an annuity due. a growing perpetuity. 4 points 1. QUESTION 9 Which of the following investment classes had the largest average return based on the historical data in the class notes? Small US stocks Large US stocks Short-term goverment bonds Long-term government bonds 5 points QUESTION 10 1. You currently own a 5-year bond with a face value of $1,000 and a coupon rate of 10 percent with annual payments. The bond is currently worth $832.39. If market interest rates remain unchanged, what will be the value of the bond when there are only 4 years left until maturity? $832 $857 $957 $1,0 00 3 points QUESTION 11 1. You are interested in investing a $10,000 gift from your grandparents for the next four years in a mutual fund that pays 8 percent annually. What will your investment be worth at the end of four years? $10,8 00 $13,6 05 $14,2 00 $15,2 15 4 points 1. QUESTION 12 If the risk-free rate of return is 3 percent and the market risk premium is 6 percent, what is the expected return on a stock with a beta of 1.8 according to the CAPM? 8.40 % 10.80 % 13.80 % 19.20 % 4 points 1. QUESTION 13 What is the expected return on a portfolio comprised of $5,000 invested in stock A and $5,000 invested in stock B (in percent)? STATE PROBABILITY RETURN % (A) RETURN % (B) Boom 0.50 30 50 Normal 0.50 10 10 2. 3 points QUESTION 14 1. Your financial advisor recommends you invest in a 25-year bond with a face value of $1,000 and an annual coupon of 10 percent. If current yield to maturity is 10 percent per year, what is the value of this bond? $1,000 $2,500 $25,00 0 $250,0 00 4 points QUESTION 15 1. Myers, Inc. will be making annual loan payments of $3,895.50 for a 10-year period starting at the end of this year. If the interest rate is 9 percent, what is the present value of this annuity? $23,2 50 $25,0 00 $29,0 00 $30,2 50 4 points QUESTION 16 1. Jackson Electric Company has borrowed $27,850 from its bank at an annual rate of 8.5 percent. The company plans to repay the loan in eight equal installments. What is the annual loan payment? $4,7 08 $4,7 48 $4,9 39 $5,1 34 4 points QUESTION 17 1. The process of converting a present value into a future value is called: annualizing. discounting. compounding. capital budgeting. 5 points QUESTION 18 1. Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment that pays 12 percent annually. How much money will he have at the end of the six years? $21,0 00 $24,6 70 $26,1 24 $28,4 03 4 points 1. QUESTION 19 Suppose you invest $5,000 in Stock A and $5,000 in Stock B. The variance of Stock A is 50 percent, the variance of Stock B is also 50 percent, and the covariance between the two stocks is 0 percent. What is the standarddeviation of your portfolio (in percent)? 3 points QUESTION 20 1. Jenny Clayton is looking to invest in some 5-year bonds that pay annual coupons of 6.25 percent on a face value of $1,000 and are currently selling for $588.79. What is the yield to maturity on these bonds? 5 percent 10 percent 15 percent 20 percent 3 points QUESTION 21 1. Downward-slopping yield curves are usually observed when the economy is growing quickly. before the beginning of a recession. always. never. 4 points QUESTION 22 1. If the interest rate is positive, then the present value of multiple cash flows is: greater than the sum of the cash flows. equal to the sum of the cash flows. less than the sum of the cash flows. higher or lower than the sum of the cash flows depending on the interest rate. 5 points QUESTION 23 1. The three economic factors that affect the shape of the yield curve are: the real rate of interest, the expected rate of inflation, and marketability. the real rate of interest, the expected rate of inflation, and interest rate risk. the nominal rate of interest, the expected rate of inflation, and default risk. the real rate of interest, the nominal rate of interest, and currency risk. 4 points QUESTION 24 1. Anna Strong will receive a single payment of $15,000 from a bank deposit in 5 years at an interest rate of 3.5 percent. The payment of $15,000 represents the: present value of an annuity future value of an annuity present value future value 4 points 1. QUESTION 25 Which of the following investments will result in the highest future value? $1,000 invested at 10% compounded annually for 5 years. $1,000 invested at 10% compounded quarterly for 5 years. $1,000 invested at 10% compounded monthly for 5 years. $1,000 invested at 10% compounded continuously for 5 years. 4 points Click Save and Submit to save and submit. Click Save All Answers to save all answers