QUESTION 28

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72%; A = 9.64%; AAA = 8.72%; BBB = 10.18%. The differences in rates among these issues were most probably caused primarily by:______

		Tax effects.
		Default risk premium.
		Maturity risk premium
		Liquidity risk premium.

5 points

QUESTION 29

John purchased 100 shares of Google common stock today. This transaction occurs in the:

		Primary market.
		Secondary market.
		Credit market.
		Money market.

5 points

QUESTION 30

An increase in a firm's expected growth rate would normally cause its required rate of return to

		increase.
		decrease.
		remain constant.
		possibly increase, possibly decrease, or possibly have no effect.

5 points

QUESTION 31

What's the future value of the initial $200 deposit after 5 years? We assume current interest rate is = 12%, compounded annually. ______

		$365.2
		$363.3
		$352.5
		$396.8

5 points

QUESTION 32

What's the present value of $200 due in 5 years? We assume current interest rate is = 12%, compounded monthly. ______

		$122.1
		$113.5
		$110.1
		$107.3

5 points

QUESTION 33

A stock has the following probability distribution: If economy is good (the probability is 20%), its expected stock return is 20%; if economy is on average (the probability is 60%), its expected stock return is 10%; if economy is bad (the probability is 20%), its expected return is -20%. Find the expected rate of return for the stock

		4.0%
		6.0%
		10.0%
		14.0%

5 points

QUESTION 34

Using the data from Question 33, find the standard deviation (risk) for the stock

		11.49%
		12.59%
		13.56%
		14.56%

5 points

QUESTION 35

Construct an amortization schedule for a $1,000, 5% annual rate loan with 3 equal payments. The first payment will be made at the end of the1st year. Find the required annual payments

		$355.8
		$367.2
		$388.0
		$390.7

5 points

QUESTION 36

Based on the information from Question 35, what's the ending balance of the amortized loan at the end of the first year

		$0
		$349.7
		$388.3
		$682.8

5 points

QUESTION 37

Based on the information from Question 35 and 36, calculate the total amount of interests you should pay for the amortized loan in three years.

		$28.8
		$55.4
		$80.0
		$101.6

5 points

QUESTION 38

Find the yield to maturity (YTM) for a 10-year, 10% annual coupon rate, $1,000 par value bond if the bond sells for $1,000 currently? We assume that interest is paid on this bond annually.

		5.11%
		6.91%
		7.64%
		10.0%

5 points

QUESTION 39

Using the information from Question 38, calculate the bond's current yield.

		6.20%
		6.57%
		10.0%
		8.21%

5 points

QUESTION 40

Using the information from Question 38 and 39, calculate the bond's capital gain yield.

		-0.35%
		-1.27%
		0.35%
		0.0%