The duration of a ten-year, 6 percent coupon bond when the interest rate is 8 percent is 7.6 years. What happens to the price of the bond if the interest rate falls to 6 percent? (Points : 3.5)

a. The price increases by 14.07%. b. The price decreases by 14.07%. c. The price increases by 2.00%. d. The price decreases by 2.00%.

Which one of the following statement is true? (Points : 3.5)

a. A companys sustainable growth rate is the minimum growth rate excluding any external equity financing while maintaining a constant debt-equity ratio. b. The sustainable growth rate assumes the debt-equity ratio is 1.0. c. The retention ratio is defined as additions to retained earnings divided by net income. d. A companys sustainable growth rate is the maximum growth rate achievable with unlimited debt financing. e. None of the above.

Which of the following statement is false? (Points : 3.5)

a. Private equity investments are structured as limited partnerships with a specified duration usually of 10 years. The limited partner is the private equity firm, which raises a pool of money from general partners, such as institutional investors and insurance companies. b. Professional venture capital companies, who make high risk equity investments in entrepreneurial businesses capable of rapid growth and high investment returns. Their goal is to liquidate the investment in 5 or 6 years. c. In general, a startup firm is far too risky to qualify for a bank loan and too small to attract public financing. d. Funding options for a startup firm include loans against stable cash flows such as A/R, personal savings, venture capitalists and strategic investors.

Which of the following is false when markets are semistrong-form efficient (Points : 3.5)

a. Investors cannot expect to earn positive risk-adjusted returns. b. It is pointless to time the purchase or sale of the firms securities. c. Private information has no predictive power in respect to market prices. d. The best forecast of future price is current price adjusted for trend.

Bunge, Inc. issued a 20-year bond which is callable in 15 years; the face value of the bond is $1000. It has a coupon rate of 6.75% payable annually, has a call premium of $105, and is currently selling for $912. What is the yield to call?(Caution: You want to find out the rate of return earned till the bond "called" back, not till the "maturity" of the bond.)(Points : 3.5)

a. 8.17%. b. 7.87%. c,. 7.62%. d. 7.76%.

The of Party Time, Inc. just paid a dividend of $2.5 per share (D0). Analysts expect its dividend to grow at 10% per year for the next three years and then 5% per year thereafter. If the required rate of return on the stock is 25%, what is the current value of the stock? (Points : 3.5)

a. $14.78. b. $22.30. c. $25.98. d. $40.38. e. $33.74. f. $23.31.