How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is $1,600? . . A . $218,080 . . B . . $202,503 . . C . . $186,926 . . D . . $233,658 . . E . . $249,235 . . F Shady Rack Inc. has a bond outstanding with 9.75 percent coupon, paid semiannually, and 17 years to maturity. The market price of the bond is $1,042.43. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be the percent change in the market price of the bond? . . A . . -17.09% . . B . . -16.39% . . C . . -17.76% . . D . . -14.01% . . E . . -15.66% . . F . . -14.87% . Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7, and $10 for the years 8-10. Thereafter, starting in year 11, the company will pay a constant dividend of $5/year forever. If you require 12 percent rate of return on investments in this risk class, how much is this stock worth to you? . A . . $37.77 . B . . $34.54 . C . . $50.50 . D . . $45.68 . E . . $41.46 . F . . $55.99 . Your required rate of return is 15%. What is the net present value of a project with the following cash flows? . . Year . 0 . 1 . 2 . 3 . 4 . 5 . Cash Flow . -750 . 450 . 350 . 150 . 125 . -100 . . . A. 26.33 . . . B . . 72.15 . . C . . 15.56 . . D . . 60.27 . . E . . 48.68 . . F . . 37.37 . Please use the following information for this and the following two questions. BB Lean has identified two mutually exclusive projects with the following cash flows. . Year . 0 . 1 . 2 . 3 . 4 . Cash Flow Project A -52,000.00 . 18,000.00 . 17,000.00 . 15,000.00 . 12,000.00 . Cash Flow Project B -52,000.00 . 17,800.00 . 10,000.00 . 12,000.00 . 17,000.00 The company requires a 11.5% rate of return from projects of this risk. What is the NPV of project A? . . A . . 5,972.87 . . B . . 417.37 . . C . . 1,395.64 . . D . . 1,624.90 . . E . . 5,180.35 . . F . . 972.57 . What is the IRR of project B? . . A . . 12.06% . . B . . 12.94% . . C . . 13.05% . . D . . 20.80% . . E . . 13.90% . . F . . 14.68% . At what discount rate would you be indifferent between these two projects? . . A . . 3.1177% . . B . . 34.1306% . . C . . 13.5250% . . D . . 26.0812% . . E . . 14.7386% . . F . . 15.8950% . A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is $1,000. Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 9.5%. III. The bond’s current yield is 10%. . . A . . I, II Only . . B . . I, III Only . . C . . I, II, and III . . D . . III Only . . E . . I Only . . F . . II, III Only . Riverhawk Corporation has a bond outstanding with a market price of $1,250.00. The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%. What is the bond’s coupon rate? . . A . . 13.61% . . B . . 11.31% . . C . . 9.77% . . D . . 10.54% . . E . . 12.08% . . F . . 12.84% . You purchased a stock for $20 per share. The most recent dividend was $2.50 and dividends are expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock? . . A . . 17.64% . . B . . 21.50% . . C . . 17.00% . . D . . 18.38% . . E . . 19.25% . . F . . 20.27% . Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today? . . A . . $22.80 . . B . . $15.96 . . C . . $20.52 . . D . . $25.08 . . E . . $18.24 . . F . . $13.68 . Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share. Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter. What is the current market value of the ASI’s stock if companies in this risk class have a 16% required rate of return? . . A . . $56.03 . . B . . $48.35 . . C . . $51.29 . . D . . $45.54 . . E . . $54.27 . . F . . $42.87 . The Retarded Company’s dividends are declining at an annual rate of 6 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock? . . A . . $13.85 . . B . . $19.20 . . C . . $17.09 . . D . . $15.33 . . E . . $12.57 . . F . . $21.78 . The dividend yield of a stock is 9 percent. If the market price of the stock is $18 per share and its dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by the company? . . A . . $1.36 . . B . . $1.53 . . C . . $1.02 . . D . . $1.70 . . E . . $1.19 . . F . . $0.85 . Last year, Jen and Berry Inc. had sales of $45,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Twenty percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year? . . A . . $12,667 . . B . . $12,000 . . C . . $10,636 . . D . . $11,500 . . E . . $14,250 . . F . . $13,250 . You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.75 percent and the inflation premium is 3 percent. US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form. . . A . . 5.58% . . B . . 6.09% . . C . . 5.06% . . D . . 6.35% . . E . . 5.32% . . F . . 5.83% . Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below. . . . Bond X . Bond Y . Face value . $1,000 . $1,000 . Annual Coupon Payment . $120 . $130 . Payment Frequency . Semiannual . Annual . Years to maturity . 15 . 15 . Price . $919.43 . ? . . . What is the price of bond Y? . . A . . $925.88 . . B . . $940.92 . . C . . $1,007.15 . . D. $956.95 . . . E . . $973.44 . . F . . $989.75
