Suppose the September CBOT Treasury bond futures contract (6% coupon rate, semia

Question

Suppose the September CBOT Treasury bond futures contract (6% coupon rate,
semiannual payment, and 20 years to maturity) has a quoted price of 96-09. If
annual interest rates go up by 1.00 percentage point, what is the gain or loss on
the futures contract? (Assume a $1,000 par value, and round to the nearest
whole dollar.)

a. -$106.00
b. -$105.00
c. -$104.00
d. -$101.00
e. -$103.00






Which of the following is generally NOT true and an advantage of going public?

a. Facilitates stockholder diversification.
b. Increases the liquidity of the firm's stock.
c. Makes it easier to obtain new equity capital.
d. Establishes a market value for the firm.
e. Makes it easier for owner-managers to engage in profitable self-dealings.



Brantley Buildings Inc. has decided to go public by selling $6,000,000 of new
common stock. Its investment bankers agreed to take a smaller fee now (6% of
gross proceeds versus their normal 10%) in exchange for a 1 year option to
purchase an additional 200,000 shares at $5.00 per share. The investment
bankers expect to exercise the option and purchase the 200,000 shares in exactly
one year, when the stock price is forecasted to be $6.50 per share. However,
there is a chance that the stock price will actually be $12.00 per share one year
from now. If the $12 price occurs, what would the present value of the entire
underwriting compensation be? Assume that the investment banker's required
return on such arrangements is 15%, and ignore taxes.

a. $1,507,391
b. $1,577,391
c. $1,569,391
d. $1,541,391
e. $1,517,391

Northern Water Company just sold a bond with 60 warrants attached. The
bonds have a 20-year maturity and an annual coupon of 10%, and they were
issued at their $1,000 par value. The current yield on similar straight bonds is
15%. What is the implied value of each warrant?

a. $3.26
b. $3.68
c. $3.13
d. $3.35
e. $3.56






Which of the following statements is CORRECT?

a. Increasing a company

Explanation / Answer

1.b. -$105.00
2.c. Makes it easier to obtain new equity capital.
3.d. $1,541,391
4.a. $3.26
5.d. Increasing a company

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