New version page

TOWSON FIN 331 - Practice questions with answers

Documents in this Course
Load more
Upgrade to remove ads

This preview shows page 1-2-3-4-5-6 out of 17 pages.

Save
View Full Document
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 17 pages.
Access to all documents
Download any document
Ad free experience

Upgrade to remove ads
Unformatted text preview:

Multiple Choice 1 Assume that interest rates on 20 year Treasury and corporate bonds with different ratings all of which arenoncallable 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 a Real risk free rate differences b Tax effects c Default risk and liquidity differences d Maturity risk differences e Inflation differences 2 Taggart Inc s stock has a 50 chance of producing a 19 return a 30 chance of producing a 10 return anda 20 chance of producing a 28 return What is the firm s expected rate of return Do not round yourintermediate calculations a 7 45 b 8 49 c 6 90 d 6 62 e 7 73 3 Malko Enterprises bonds currently sell for 1 000 They have a 6 year maturity an annual coupon of 75 and apar value of 1 000 What is their current yield a 8 55 b 8 85 c 6 98 d 7 28 e 7 50 4 Calculate the required rate of return for Climax Inc assuming that 1 investors expect a 4 0 rate of inflationin the future 2 the real risk free rate is 3 0 3 the market risk premium is 5 0 4 the firm has a beta of1 00 and 5 its realized rate of return has averaged 15 0 over the last 5 years Do not round your intermediatecalculations a 14 04 b 14 64 c 11 40 d 13 20 e 12 00 Copy of Practice Test II FIN 331 Chapters 6 8 5 Dothan Inc s stock has a 25 chance of producing a 31 return a 50 chance of producing a 12 return anda 25 chance of producing a 18 return What is the firm s expected rate of return Do not round yourintermediate calculations a 10 18 b 9 25 c 9 81 d 9 71 e 8 42 6 Radoski Corporation s bonds make an annual coupon interest payment of 7 35 every year The bonds have apar value of 1 000 a current price of 1 080 and mature in 12 years What is the yield to maturity on thesebonds a 5 10 b 7 40 c 6 31 d 5 55 e 6 38 7 Cheng Inc is considering a capital budgeting project that has an expected return of 18 and a standard deviationof 30 What is the project s coefficient of variation Do not round your intermediate calculations Round thefinal answer to 2 decimal places a 2 08b 1 83c 1 45d 1 67e 1 40 8 Morin Company s bonds mature in 8 years have a par value of 1 000 and make an annual coupon interestpayment of 65 The market requires an interest rate of 7 0 on these bonds What is the bond s price a 970 14b 941 04c 911 93d 1 173 87e 1 105 96 9 Assume that you are considering the purchase of a 20 year noncallable bond with an annual coupon rate of9 5 The bond has a face value of 1 000 and it makes semiannual interest payments If you require an 10 9 nominal yield to maturity on this investment what is the maximum price you should be willing to pay for thebond a 1 028 85b 700 68c 886 94d 904 67e 1 108 67Copy of Practice Test II FIN 331 Chapters 6 8 10 Adams Enterprises noncallable bonds currently sell for 1 460 They have a 15 year maturity an annual couponof 85 and a par value of 1 000 What is their yield to maturity a 3 47 b 4 28 c 3 64 d 4 71 e 5 31 11 Sadik Inc s bonds currently sell for 1 240 and have a par value of 1 000 They pay a 105 annual coupon andhave a 15 year maturity but they can be called in 5 years at 1 100 What is their yield to call YTC a 6 16 b 6 48 c 6 03 d 7 72 e 4 86 12 Bae Inc is considering an investment that has an expected return of 35 and a standard deviation of 10 Whatis the investment s coefficient of variation Do not round your intermediate calculations Round the final answerto 2 decimal places a 0 29b 0 26c 0 28d 0 33e 0 24 13 Ryngaert Inc recently issued noncallable bonds that mature in 15 years They have a par value of 1 000 and anannual coupon of 5 7 If the current market interest rate is 7 1 at what price should the bonds sell a 978 09b 681 17c 707 37d 1 074 15e 873 29 14 Tom O Brien has a 2 stock portfolio with a total value of 100 000 55 000 is invested in Stock A with a beta of0 75 and the remainder is invested in Stock B with a beta of 1 42 What is his portfolio s beta Do not round yourintermediate calculations Round your final answer to 2 decimal places a 0 95b 1 05c 1 00d 1 06e 1 16Copy of Practice Test II FIN 331 Chapters 6 8 15 Dyl Inc s bonds currently sell for 1 010 and have a par value of 1 000 They pay a 65 annual coupon andhave a 15 year maturity but they can be called in 5 years at 1 100 What is their yield to maturity YTM a 6 39 b 7 80 c 5 31 d 5 95 e 6 65 16 Cooley Company s stock has a beta of 1 48 the risk free rate is 2 25 and the market risk premium is 5 50 What is the firm s required rate of return Do not round your intermediate calculations a 10 39 b 10 70 c 11 43 d 9 35 e 9 87 17 Bill Dukes has 100 000 invested in a 2 stock portfolio 72 500 is invested in Stock X and the remainder isinvested in Stock Y X s beta is 1 50 and Y s beta is 0 70 What is the portfolio s beta Do not round yourintermediate calculations Round the final answer to 2 decimal places a 1 60b 1 15c 1 41d 1 28e 1 47 18 Porter Inc s stock has an expected return of 11 00 a beta of 1 25 and is in equilibrium If the risk free rate is2 00 what is the market risk premium Do not round your intermediate calculations a 8 35 b 8 78 c 6 48 d 7 20 e 6 12 19 Which of the following events would make it more likely that a company would call its outstanding callablebonds a The company s bonds are downgraded b Market interest rates rise sharply c Market interest rates decline sharply d The company s financial situation deteriorates significantly e Inflation increases significantly Copy of Practice Test II FIN 331 Chapters 6 8 20 A Treasury bond has an 8 annual coupon and a 7 5 yield to maturity Which of the following statements isCORRECT …


View Full Document
Download Practice questions with answers
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Practice questions with answers and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Practice questions with answers 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?