The stock of Trudeau Corporation went from $27 to $40 last year. The firm also p

Question

The stock of Trudeau Corporation went from $27 to $40 last year. The firm also paid $1 in dividends during the year. Compute the rate of return. ( 2. Given the following financial data, compute the return on assets and return on equity: net income/sales = 7%, sales/total assets = 2.5X, and debt/total assets = 20%. 3. What is the approximate yield to maturity of an 8% coupon bond with a par value of $1,000? The bond is currently selling for $920 and has 5 years to maturity. 4. A convertible bond has a face value of $1,000 and the conversion price is $50 per share. The stock is selling at $30 per share. The bond pays $65 per year in interest and is selling in the market for $950. It matures in 7 years. Market rates are 10% annually. (I) What is the conversion ratio? (II) What is the conversion value? 5. If a $100,000 Treasury bond futures contract changes by 5/32, what is the dollar change? 6. A mutual fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What is the dollar value of the load (commission)? 7. A shopping center has an annual net operating income of $1,050,000 and a capitalization rate of 8%. What is its value? 8. An investment has the following range of outcomes and probabilities. Outcomes (Percent) Probabilities of Outcomes 5% .25 7% .50 12% .25 Calculate the expected value and the standard deviation (round to two places after the decimal point where necessary).

Explanation / Answer

1. rate of return = (40+1-27)/27 =51.85% 2. return on assets = net income/sales*sales/total assets = 7%*2.5 = 17.50% return on equity = 17.5%/(80%) =21.88% 3. yield to maturity = r 920 = 80/(1+r) + 80/(1+r)^2 + 80/(1+r)^3 + 80/(1+r)^4 + 1080/(1+r)^5 yield to maturity =10.12% 7. value = 1,050,000 *8% =$84000 8. expected value = 5%*.25 +7%*.50 +12%*.25 =7.75% standard deviation = sqrt((5%-7.75%)^2*.25 +(7%-7.75%)^2*.50 +(12%-7.75%)^2*.25) =2.59%

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