Time Sensitive questions - need help in one hour! Finance / Fixed Income Sec & Cr Analysis Exam! Please see document attached. Thank you!!!

1. (TCOs 1, 8, 9) Using the security market line formula rather than the dividend discount formula, determine the expected return on a firm's common stock when: (a) beta = 1.2; (b) the risk-free rate is 8%; and (c) marketplace interest rates have hovered around 13%. (Points : 20) Question 2.2. (TCOs 1, 5, 6) Calculate the appropriate selling price of a 30-year 5% coupon, $1,000 corporate bond that was purchased five years ago. Marketplace interest rates are averaging 8%. (Points : 20) Question 3.3. (TCO 6) Calculate the five ratios for the following company info. Income Statement Revenue EBIT Interest 10,000 $2,000 $500 Earnings B4 Tax $1,500 EAT (at 30%) Balance Sheet $1,050 Assets cash $1,000 A/R $10,000 return on sales ROA ROE fixed asset turnover times interest earned (Points : 20) a/p $2,000 Bonds payable Equip $25,000 Bldg equity $50,000 $100,000 Total $136,000 - Liab. + OE $84,000 $136,000 Question 4.4. (TCO 2) Given the data below, calculate the expected return, variance, and standard deviation of the following company. In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5%. In an expanding economy with an expected probability of occurrence of 20%, the expected return would be 10%. In a normal economy expected to occur 50% of the time, the expected return would be 5%. (Points : 20) Question 5.5. (TCO 9) As percentage of equity on the balance sheet increases, financial leverage decreases, which makes EPS decrease. If this is the case, why don't all firms try to end up with 99.9% debt? (Points : 20) Question 6.6. (TCO 7) What would be the expected change to a 30-year bond's market price or value if its YTM increases to 9.4%? Its YTM is now 8.5%, it has an 8% annual coupon, $1,000 face value, it is currently priced at $897.26, and its duration is eight years. (Points : 20) Question 7.7. (TCO 9) Explain what M&M Proposition I with and without taxes is all about. You must use your own words to earn credit here.(Points : 20) Question 8.8. (TCO 6) A $1,000 face value bond was issued at par 20 years ago with a 6% coupon paid semiannually. The bond now has eight years remaining to maturity and similar debt obligations are yielding 12%. Compute the current price of the bond. Assuming that the bond is sold at its current price, what is the capital gain or loss from the original purchase? Now assume that the price of the bond returns to par. What is the percentage capital gain or loss for the new owner? Please explain why the percentage gain is different from the percentage loss. (Points : 22) Question 9.9. (TCO 6) What is the interest rate needed on a $1,000 face value, 6% coupon corporate bond to make it equivalent in terms of return to one whose interest rate is tax free? Assume the corporate tax rate is 30%. (Points : 10) Question 1.1. (TCO 1) Which of the following is true about fixed-income securities? (Points : 6) You will always find some on the right side of the balance sheet. Could be found on the right side of the balance sheet Occasionally show up on the left side of the balance sheet None of the above Question 2.2. (TCO 2) The concept of risk versus return _______. (Points : 6) is all about investors' expectation of higher risk deserving higher returns means that most investors require 2 times the change in return for a given change in risk refers to most of us being risk-loving None of the above Question 3.3. (TCO 5) Which of the following is true? (Points : 6) Current yield = dividends / price paid. Coupon rate = interest / price paid. YTM = interest / 30. None of the above Question 4.4. (TCO 9) Financial leverage is _______. (Points : 6) always a good thing a good thing when sales are falling a good thing when sales are rising None of the above Question 5.5. (TCO 9) Which of the following is true about a firm's WACC? (Points : 6) WACC is only important when a firm needs to calculate its taxes. WACC is important as it represents the percentage of debt versus equity. WACC is important as it is the discount rate used in capital budgeting analysis. None of the above Question 6.6. (TCO 7) The ideal capital structure of a firm is when ______. (Points : 6) financial leverage = 1 WACC is minimized the tax savings from added debt is exactly offset by increased bankruptcy costs None of the above Question 7.7. (TCO 3) Which of the following are or could be part of the buying, selling, and trading of corporate bonds? (Points : 6) IPO process and shelf registration Auction markets and dealer markets Investment bankers All of the above Question 8.8. (TCO 9) What is the premise behind M&M Principle 1 without taxes? (Points : 6) Capital structure is primarily determined by a firm's WACC. In a world of no taxes, the value of the firm is unaffected by capital structure. The higher the tax rate, the higher the firm's value. None of the above Question 9.9. (TCO 6) Which of the following is true about the yield curve? (Points : 6) The normal yield curve is upward sloping to the right due to several factors. The normal yield curve is upward sloping to the right solely because of inflation. The normal yield curve is downward sloping to the left. None of the above Question 10.10. (TCO 4) Where could you find trend information about the bond market? (Points : 6) Dow Jones Average NASDAQ S&P 500 None of the above Question 11.11. (TCO 8) Who would normally be required to create a portfolio investment policy? (Points : 6) Pension fund managers 401k plan administrators Large insurance companies All of the above Question 12.12. (TCOs 1, 8) Corporate bonds, T-bonds, and preferred stock are all examples of which of the following? (Points : 6) Investment options for an investor seeking low risk Investment options for an investor seeking high return for the high risk he or she is taking Fixed-income securities None of the above Question 13.13. (TCO 6) Portfolio diversification is all about which of the following? (Points : 6) Maximizing the investor's return Minimizing the risk to the investor Maximizing the return per unit of risk to the investor None of the above Question 14.14. (TCO 5) What does the term structure of interest rates refer to? (Points : 6) The fact that long-term interest rates are always higher than short-term interest rates The relationship between bond maturities and interest rates Why the expectations theory and liquidity preference theory are contradictory None of the above