Which of the following bonds has the lowest interest rate risk

Question 1 options:

	A 12-year bond with a face value of $1000 and a 5% coupon rate
	A 3-year bond with a face value of $1000 and a 2% coupon rate
	A 7-year bond with a face value of $1000 and a 10% coupon rate
	A 15-year bond with a face value of $1000 and a 6% coupon rate

Question 2 (2 points)

If you invest $2000 every quarter at an annual rate of 8% compounded quarterly, how much would you accumulate at the end of 30 years

Question 2 options:

Assessment 2 - Test 2

Question 3 (1 point)

Which of the following statements regarding the similarities between ordinary shares and bonds is correct?

Question 3 options:

	Both ordinary shares and bonds promise their owners a maturity payment at some specified time in the future.
	The value of both an ordinary share and a bond is equal to the present value of all future cash flows received to the security holder.
	Both ordinary shares and bonds promise their holders a pre-determined constant income stream.
	Both ordinary shares and bonds promise their owners interest income at some specified time in the future.

Question 4 (1 point)

Gate Ltd is a door manufacturer and there shares are listed on the stock exchange. The company last paid a dividend of $0.65 on its ordinary shares. The company's dividends are expected to grow at a constant rate of 3.5% per annum indefinitely. If the required rate of return is 15%, what is the current value of the share?

Question 4 options:

	$5.65
	$5.85
	$6.70
	$6.93

Question 5 (1 point)

The yield to maturity on a bond is:

Question 5 options:

	Is a fixed rate and only varies when interest rates go up.
	ls the discount rate that discounts all future interest payments and the face value value of the bond to equal it's present value.
	the expected return of the bond if held to its maturity date.
	B and C

Question 6 (1 point)

New anti pollution laws have caused a company to experience a decline in it's profit due to increases in compliance costs. The new law has only had a financial impact on a few companies. This risk can be viewed as:

Question 6 options:

	diversifiable risk
	All the listed options
	unsystematic risk
	independent risk

Question 7 (1 point)

Which of the following are examples of unsystematic risk?

I. Risk the home-building industry declines due to a real estate slowdown.

II. Risk resulting from uncertainty regarding a possible strike against a specific company.

III. Risk resulting from a sharp downturn in the economy.

IV. Risk resulting from interest rate decreasing

Question 7 options:

	I only
	II only
	I, II
	I, II, III, IV

Question 8 (1 point)

A 5-year bond pays a coupon of 7% on a face value of $1,000. If the yield to maturity is 7%, what is the market value of the bond?

Question 8 options:

	over $1,000
	over $1,200
	exactly $1,000
	under $1,000

Question 9 (1 point)

Sleep Ltd's preference shares pay a perpetual fixed annual dividend of $1.60 per share. If the appropriate discount rate for this investment is 12%, what is the price of this share?

Question 9 options:

	$15
	$11.11
	cannot be determined without a maturity date.
	$13.33

Question 10 (2 points)

You intend to borrow $50,000 over 4 years to purchase the latest model electric car. The loan must be repaid over 4 years (assuming equal repayments). The interest rate on the loan is 12% per annum, compounded monthly. What is the amount of each monthly repayment?

Question 10 options:

	$2,554.50
	$1,316.69
	$7,688.43
	$2,388.33