Guys I need some help with some Corporation Finance questions: 1. A bond is curr

Question

Guys I need some help with some Corporation Finance questions:

1. A bond is currently selling for $1,087. If the yield to maturity is 10%, the coupon rate will be:

a) less than 10%. b) equal than 10%. c) more than 10%.

2. The ABC Co. has $1,000 face value bond with a market price of $937.6. The bond pays interest annually, matures in 9 years, and has a yield to maturity of 10.7 percent. What is the current yield?

3. What is the net present value of the following cash flows? Assume an interest rate of 3.5%

-$11,895

$7,722

$5,687

$5,120

4. A stock just paid a dividend of D0 = $3.4. The required rate of return is rs = 15.8%, and the constant growth rate is g = 3%. What is the current stock price?

5. A project has the following cash flows. What is the internal rate of return?

    Year                     0              1                2              3       

Cash flow     -$121,000      68,150     $42,200      $39,100

6. ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 4%.

7. A 8.9 percent $1,000 bond matures in 17 years, pays interest semiannually, and has a yield to maturity of 16.02 percent. What is the current market price of the bond?

8. ABC Corp. just paid a dividend of $2.4 per share at the end of the year. The stock has a required rate of return is 18%. The dividend is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)

9. Uptown Insurance offers an annuity due with semi-annual payments for 19 years at 4.9 percent interest. The annuity costs $176,239 today. What is the amount of each annuity payment?

10. The principal amount of a bond that is repaid at the end of term is called the par value or the:

a) call premium b) perpetuity value c) face value d) back-end value e) coupon value

11. ABC’s last dividend paid was $4.4, its required return is 13%, its growth rate is 6%, and its growth rate is expected to be constant in the future. What is ABC's expected stock price in 19 years?

12. What is the effective rate of 18% compounded monthly?

13. Suppose an investment offers to double your money in 39 years. What annual rate of return are you being offered if interest is compounded semi-annually?

14. Suppose the real rate is 9.83% and the inflation rate is 4.65%. Solve for the nominal rate.

15. The common stock of ABC Industries is valued at $49 a share. The company increases their dividend by 3.1 percent annually and expects their next dividend to be $1.84. What is the required rate of return on this stock?

16. A bond that sells for less than face value is called as:

a) discount bond b) premiun bond c) par value bond d) debenture e) perpetuity

17. How many years will it take to quadruple (i.e. 4 times) your money at 9% compounded quarterly?

18. Suppose that today's stock price is $49.8. If the required rate on equity is 18.6% and the growth rate is 7.9%, compute the expected dividend (i.e. compute D1)

19. Given the following cash flows, calculate the payback period:

-921

20. An investment is acceptable if the profitability index (PI) of the investment is:

a) less than the net present value (NPV). b) less than one. c) greater than one. d) greater than the internal rate of return (IRR). e) greater than a pre-specified rate of return.

Thanks!

-$11,895

$7,722

$5,687

$5,120

Explanation / Answer

1)

Correct option is (c) more than 10%

According to yield-coupon-price relationship, If the coupon rate is more than required yield, bond will trade at premium else will trade at discount.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.