QUESTION 40 Using the information from Question 38 and 39, calculate the bond\'s

Question

QUESTION 40

Using the information from Question 38 and 39, calculate the bond's capital gain yield.

-0.35%

-1.27%

0.35%

0.0%

5 points   

QUESTION 41

An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and $50,000 in stock B which has a beta of 0.60. The return on the market is equal to 8% and treasure bonds have a yield of 3% (rRF). What's the portfolio beta?

0.60

1.30

1.50

1.80

5 points   

QUESTION 42

Using the information in Question 41, calculate the required rate of return on the investor's portfolio

8.0%

10.5%

12.0%

13.4%

5 points   

QUESTION 43

A retail store is offering a diamond ring for sale for 36 months at $128 per month. The retail price of the ring is $3,900. What is the interest rate on this offer?

10.5%

11.2%

12.5%

13.1%

5 points   

QUESTION 44

You want to receive $5,000 per month in retirement. If you can earn 0.8% return per month and you expect to need the income for 30 years, how much do you need to have in your account at retirement?

$575,128

$589,511

$606,323

$638,208

5 points   

QUESTION 45

A firm has issued a bond. The bond has a 12% coupon, paid semiannually, a current maturity of 20 years, and sell for $1,171.59. The firm's marginal tax rate is 40%. What's the firm's after-tax component cost of debt?

3.0%

5.0%

6.0%

12%

5 points   

QUESTION 46

A firm's preferred stock currently sells for $90 per share and pays a dividend of $10 per share. However, the firm will only receive $80 per share from the sale of new preferred stock due to the floatation costs. What's the firm's component cost of Preferred stock?

9.5%

10.0%

11.1%

12.5%

5 points   

QUESTION 47

A firm's common stock currently sells for $40 per share. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10% per year. What's the firm's cost of common stock using DCF approach?

9.5%

10.0%

15.5%

16.5%

5 points   

QUESTION 48

A stock is selling for $50 in the market. The company's beta is 1.2, the market risk premium (rM - rF) is 5%, and the risk-free rate is 3%. The most recent dividend paid is D0 = $2 and dividends are expected to grow at a constant rate g. What's the dividend growth rate g for this stock?

3.00%

4.19%

4.81%

5.0%

5 points   

QUESTION 49

Using the information from Question 48, find the stock's capital gain yield.

3.00%

4.19%

4.81%

5.0%

5 points   

QUESTION 50

Using the information from Question 48, find the stock's dividend yield.

3.00%

4.19%

4.81%

5.0%

-0.35%

-1.27%

0.35%

0.0%

Explanation / Answer

QUESTION 41:

Portfolio beta = ($50,000 * 2.40 + $50,000 * 0.60) / ($50,000 + $50,000)

= 1.50

QUESTION 42:

Return on Stock A = 3% + 2.40 * (8% - 3%)

= 15.00%

Return on Stock B = 3% + 0.60 * (8% - 3%)

= 6.00%

Portfolio required rate of return = (15.00% * $50,000 + 6.00% * $50,000) / ($50,000 + $50,000)

= 10.50%

QUESTION 43;

$128 = $3,900 * Monthly rate * (1 + Monthly rate)36 / [(1 + Monthly rate)36-1]

=> Monthly rate = 0.93%

Annual rate = 0.93% * 12

= 11.2%

QUESTION 44:

Value at retirement = $5,000 * [1 - (1 + 0.8%)-30*12] / 0.8%

= $589,511

Repost the remaining question separately

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