Question

2. What is the duration of a $1,000, 8% coupon bond with 4 years to maturity. Assume that all the market interest rates are 10%. *

A. 4 years

B. 3.56 years

C. 3 years

D. 3.75 years

3. If you expect the inflation rate to be 17 percent next year and a one-year bond has a yield to maturity of 8 percent, then the real interest rate on this bond is:

A. 10%

B. 25%

C. 9%

D. 8%

8. You won a lottery of $15 million, payable over 30 years at $500,000 per year with the first payment to be made one year from now. What is the lottery worth if the interest rate is 11%. *

A. $5.0021 million

B. $15 million

C. $150 million

D. $5.48 million

You borrow $10,000 from a loan shark. If you will owe $20,000 in 5 years, what is the yield to maturity on this loan? *

A. 10%

B. 14.87%

C. 20%

D. 15%

15. What is the present value of $25,000 due in 50 years if the discount rate is 7.5%? *

A. $627.22

B. $67.23

C. $672.23

D. $500

16. Based on annual compounding, what would be the YTM be on a 15-year,12% coupon rate, $1,000 par value bond that’s currently trading at $800? *

A. 15.5%

B. 12%

C. 14%

D. 10%

A tax-free municipal bond has an interest rate of 4.3%. What is the equivalent taxable yield on a regular coupon bond given a 40% tax bracket? *

3.68%

7.16%

8.34%

9.00%

Other:

You short sell 100 shares of Microsoft, whose price is currently $50 per share, and give your broker $10,000 to establish a margin account. Assume at the end of the year Microsoft pays a dividend of $3 per share. If the maintenance margin is 30%, how high can the price of Microsoft go before you receive a margin call? *

$35.4

$36.75

$37.48

$38.13

Other:

Arno Traders opened an account to short sell 4,000 shares of American express at $60 per share. The initial margin requirement was 50%. (The margin account pays no interest.), and the stock has paid a dividend of $2.00 per share. How much in cash or securities must Amo put into his brokerage account? *

$24,000

$120,000

$12,000

$240,000

Other:

Sami is an investor and he wants to buy 400 shares of HP stock that is valued at $100 per share. He invested 30,000 of his equity and the borrowed the other $10,000 from his broker. Assuming an interest rate on the margin loan on 10% per year, what would the investor’s rate of return be if HP stock goes up 10% by year end? *

5%

10%

12%

Other:

Suppose that you are bullish on HP Stock. You buy 100 shares at the current stock price of $99/share. To afford your purchase, your initial margin requirement is 70%.You will borrow the remaining amount from your broker at 9% interest rate. Calculate your net worth when you first purchased the stocks. *

$2,970

$9,900

$6,930

Other:

Answer #1

2.

Excel formula:

1-You recently sold 50 shares of Microsoft stock to your brother
at a family reunion. At the reunion your brother gave you a check
for the stock and you gave your brother the stock certificates.
Which of the following best describes this transaction? *
A. This is an example of a direct transfer of capital.
B. This is an example of a primary market transaction.
C. This is an example of a money market transaction.
D. This is an example...

1-You recently sold 50 shares of Microsoft stock to your brother
at a family reunion. At the reunion your brother gave you a check
for the stock and you gave your brother the stock certificates.
Which of the following best describes this transaction? *
A. This is an example of a direct transfer of capital.
B. This is an example of a primary market transaction.
C. This is an example of a money market transaction.
D. This is an example...

Bond A is a $1,000, 6% quarterly coupon bond with 5 years to
maturity.
(a) If you bought Bond A today at a yield (APR) of 8%, what is
your purchase price? Is this a premium or discount bond? Why?
(b) One year later, Bond A's YTM (APR) has gone down to 6% and
you sell it immediately after receiving the coupon.
(i) What is the current yield?
(ii) What is the capital gains yield?
(iii) What is the one-year...

a) Consider Bond C – a 4% coupon bond that has 10 years to
maturity. It makes semi-annual payments and has a YTM of 7%. If
interest rates suddenly drop by 2%, what is the percentage change
of the bond? What does this problem tell you about the relationship
between interest rate and bond price?
b) Consider another bond – Bond D, which is a 10% coupon bond.
Similar to Bond C, it has 10 years to maturity. It also...

A.
What is the price of a zero-coupon bond that has 5 years to
maturity, a par value of $1,000 and a ytm of 4%?
B. A company had $340,000 in net income and the firm has
75,000 shares of stock outstanding. the market price per share is
$16.50. What is the price-earnings ratio?
C. What is the future value at t=12 of $80 payments received
at the end of each year for the next 12 years? Assume an 8%...

1. What is the duration of a 10-year zero-coupon bond with a par
value of $1,000?
2. An investor has a 15-year maturity, 8% coupon, 8% yield bond
with a duration of 10 years and a convexity of 135.5. If the
interest rate were to fall 75 basis points, what is your predicted
new price for the bond (including convexity)?

8.You buy a bond with $1,000 face value, 2 years to maturity and
a 5% coupon rate.
The market interest rate is 6%. What price are you willing to
pay?
After 1 year, you cash in the coupon payment, and you sell the
bond again. Market interest rates are now 3%. What price can you
now sell the bond for?
What is your rate of return after 1 year?
Question options:
Buying price: About $981.67
Selling price: $981.67
Rate of...

A firm has a bonds with 10 years to maturity, and a coupon rate
of 8% (paid semi?annually). The bond currently sells for $932. The
firm has a beta of 1.2. The stock price is $20/share. 3?month
treasury bills yield 5%. The firm has outstanding, $10 million in
debt at face value and there 1 million shares of common stock
outstanding. Assume that the market risk premium is 5% and the tax
rate is 35%. Calculate the WACC.

8)
Suppose a seven-year, $1,000 bond with a 10.96% coupon rate and
semiannual coupons is trading with a yield to maturity of
8.00%.
a. Is this bond currently trading at a
discount, at par, or at a premuim? Explain.
b. If the yield to maturity of the bond rises
to 8.73%
(APR with semiannual compounding), at what price will
the bond trade?
a. Is this bond currently trading at a
discount, at par, or at a premuim? Explain.
The bond...

A bond has 8 years until maturity, carries a coupon rate of 8%,
and sells for $1,100. What is the yield to maturity if interest is
paid once a year?
A. 6.3662%
B. 9.146%
C. 5.048%
D. None of these
A bond has 8 years until maturity, carries a coupon rate of 8%,
and sells for $1,100. What is the current yield on the bond?
A. 7.27%
B. 9.14%
C. 5.04%
D. None of these

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