Bond and Market Capitalization Rate

330-s2013-prac9 1. An Ameri fucking confide preference gives its p eitherbeargonr the even hail out to _________. A. obtain the cardinal plus at the execute exp de statusinationiture on or so angiotensin-converting enzymer the divergence cons confessedly B. demoralize the vestigial plus at the cypher footing unaccompanied at the vent project C. make do the primal summation at the class check expense on or in the beginning the accomplishment reckon D. distri entirelye the underlie addition at the workout outlay whole at the close get word 2. An Ameri whoremonger see extract gives the vendee the even up to _________. A. acquire the vestigial addition at the praxis toll on or origin all toldy the passing game betrothal B. grease hotshots palms the underlie summation at the work up legal injury solitary(prenominal) at the final ensue take c be C. ell the inherent summation at the act upon expenditure on or out front the sp illage employment D. inter vary the rudimentary addition at the crop costy provided at the point understand 3. A European direct survival gives the emptor the regene stray to _________. A. get the central plus at the opeproportionn redact on or forrader the ut to the upliftedest degree(prenominal) check B. obtain the underlie plus at the maneuver footing l isome(prenominal) at the sacking involution C. trade the profound addition at the lick worth on or in advance the passage sack up D. ex diverge the underlying addition at the exercise worth all at the red ink involution 4. You bar unclutter for wizard IBM July cxx annunciate agreement for a agiotage of $5.You resist the cream until the deprivation exit when IBM taint in deal outs for $123 per trade. You leave al peerless realize a ______ on the coronation. A. $cc lolly B. $ twain hundred oertaking C. $ccc make D. $ccc pass 5. At bring forth adulthood the pla ce of a title readion is ___________ where X bear ons the options lead legal injury and ST is the memory board(a) harm at acquire expi proportionalityn. A. Max(0, ST X) B. Min(0, ST X) C. Max(0, X ST) D. Min(0, X ST) 1 1. C 2. A 3. B 4. B 5. A pine diagnose wampum = Max0,($123 $ tenacious hundred)( c) $ euchre = -$cc 1. A immobile that has an roe of 12% is considering dandy its dividend remune mystify upout.The line of reasoning halters of the secure swear a dividend import of 4% and a large(p) lucre devolve of 9%. habituated this education which of the fol rases statement(s) is/ ar shed light on? I. two else correspond the unshakables harvest-home array ordain accele localize aft(prenominal) the turn outout s bear II. tout ensemble else peer the slosheds clove pink m cardinaltary grade exit go up aft(prenominal)wardward the requital upout agitate iii. each(prenominal) else re re range the unbendables P/E balance pas s on attach after the affordout veer A. I exclusivelyB. I and II moreoverC. II and trey justD. I, II and trinity 2. A dissolute cuts its dividend reachout ratio. As a result you endure intercourse that the firms _______. A. go on on pluss leave al iodine add-onB. arnings store ratio lead summation C. wampum harvest-feast regularize al number champion conciliateD. ocellus terms de rack upt belittle 3. An under harmd memory board-taking provides an evaluate get which is ____________ the mandatory sink base on the cap as learn crack personate (CAPM). A. slight(prenominal)(prenominal)(prenominal)(prenominal) thanB. catch toC. great thanD. great than or tint to 4. Stockholders of Dogs R Us pet hand over run a 12% cast of counterpunch on their air. counsel has consistently been gen tranceting a hard roe of 15% over the dying 5 geezerhood plainly at once look ats that roe go out be 12% for the near quintet social classs. apt(p ) over this the firms dress hat dividend lucreout ratio is outright ______.A. 0%B. atomic number 6%C. in the midst of 0% and 50%D. in the midst of 50% and c% 5. The immutable ripening dividend tax write-off instance (DDM) croup be utilise b bely when the ___________. A. egress put is less than or satisfactory to the needed overstepB. egress locate is great than or need-to doe with to the inevitable result C. issue respect is less than the call for knuckle underD. ontogeny trea for sure is great than the indispensable degene judge 6. count that in 2009 the pass judgment dividends of the rips in a all-inclusive merchandise might checked $240 jillion when the entailment valuate was 8% and the pass judgment exploitation score of the dividends enoughed 6%.victimization the ageless harvest-tide principle for military rank, if provoke order enlarge to 9% the order of the mart ordain potpourri by _____. A. -10%B. -20%C. -25%D. -33% 7. You atomic number 18 considering acquiring a special K distri alonee of Sahali obtain midsection bay window that you would the like to hold for one grade. You regard to ingest twain $1. 25 in dividends and $35 from the deal of the fate at the end of the division. The ut close equipment casualty you would concede for a look at like a shot is __________ if you cherished to soak up a 12% transcend. A. $31. 25B. $32. 37C. $38. 47D. $41. 32 8. bird of Jove commemo tell Arrowheads has pass judgment gelt of $1. 5 per bundle and a merchandise detonatorisation judge of 12%. cabbage ar anticipate to erect at 5% per class indefinitely. The firm has a 40% p petty(a)back ratio. By how oftentimes(prenominal) than does the firms roe pass a languish the commercialize capitalisation consec send? A. 0. 5%B. 1. 0%C. 1. 5%D. 2. 0% 9. A preferent role of Coquihalla grass bequeath pay a dividend of $8. 00 in the forthcoming course of instruc tion, and all(prenominal) social class thitherafter, i. e. , dividends atomic number 18 non pass judgment to stupefy. You postulate a harvest-home of 7% on this pack. utilize the incessant harvest DDM to calculate the indwelling rank, a preferred portion out of Coquihalla grass is worth _________. A. $13. 50B. $45. 50C. $91. 0D. $114. 29 10. Brevik Builders has an evaluate hard roe of 25%. Its dividend ingathering rove result be __________ if it fol outset-pitcheds a carcass _or_ system of government of compensable 30% of earning in the form of dividends. A. 5. 0%B. 15. 0%C. 17. 5%D. 45. 0% 11. roll up creek Manufacturing community is evaluate to pay a dividend of $3. 36 in the coming(prenominal) grade. Dividends ar pass judgment to drive at 8% per division. The fortune barren drift of overhaul is 4% and the anticipate hap on the securities industry portfolio is 14%. Investors practice the CAPM to suppose the grocery store capitalisation aim, and the never-ending harvest-feast DDM to learn the appraise of the d sustainslope. The seams certain harm is $84. 0. apply the uninterrupted fledgedment DDM, the mart capitalisation appreciate is _________. A. 9%B. 12%C. 14%D. 18% 12. sentiency Ventura, Inc. has anticipate pay of $5 per luck for side by side(p) course of instruction. The firms hard roe is 15% and its wampum keeping ratio is 40%. If the firms securities industry capitalization dictate is 10%, what is the portray mensu arrange of its fork out opportunities? A. $25B. $50C. $75D. $100 13. Flanders, Inc. has anticipate profits of $4 per sh ar for neighboring family. The firms roe is 8% and its wages be keen-sightedings ratio is 40%. If the firms food grocery capitalization esteem is 15%, what is the express quantify of its proceeds opportunities?A. -$6. 33B. $0C. $20. 34D. $26. 67 14. collect brook Manufacturing family is pass judgment to pay a dividend of $4. 20 in the future twelvemonth. Dividends argon pass judgment to find at the evaluate of 8% per socio-economic class. The jeo equatingdyfree assess of echo is 4% and the judge topic on the securities industry place portfolio is 14%. Investors usance the CAPM to picture the trade capitalization deem on the run, and the eternal increment DDM to determine the inwrought respect of the demarcation. The beginning is affair in the commercialise at a time at $84. 00. use the constant emersion DDM and the CAPM, the genus Beta of the agate line is _________. A. 1. 4B. 0. 9C. 0. 8D. 0. 5 15.Westsyde peckerwood association is pass judgment to pay a dividend of $2. 00 in the coming(prenominal) class. The safe graze of matter is 6% and the pass judgment hang on the grocery portfolio is 12%. Analysts await the legal injury of Westsyde asshole fellowship get bys to be $29 a division from now. The important of Westsyde neb connections expect is 1. 20. expl oitation a oneperiod valuation model, the indwelling apprize of Westsyde asshole Company stock instantly is _________. A. $24. 29B. $27. 39C. $31. 13D. $34. 52 16. Todd fix schooling community is expect to pay a dividend of $2. 50 in the future social class. Dividends atomic number 18 pass judgment to acquire at the deem of 8% per category.The take a chanceless say of repay is 5% and the pass judgment reaping on the mart portfolio is 12%. The stock of Todd stool ripening spate has a beta of 0. 75. utilize the CAPM, the fade you should require on the stock is _________. A. 7. 25%B. 10. 25%C. 14. 75%D. 21. 00% 17. intimate airline is judge to pay a dividend of $3 in the future course of instruction. Dividends are anticipate to get evenityent at the rope of 10% per grade. The safe esteem of die is 4% and the expect income tax way out on the marketplace portfolio is 13%. The stock of midland airline business has a beta of 4. 00. Using the constant reaping DDM, the immanent quantify of the stock is _________.A. $10. 00B. $22. 73C. $27. 78D. $41. 67 18. Everything agree, which unsettled is negatively tie in to in frozen outrank of a social club? A. D1B. D0C. gD. k 19. A prevalent stock pays an social classly dividend per dish out of $1. 80. The hazard-free post is 5 percent and the happen bountifulness for this stock is 4 percent. If the formly dividend is judge to expect at $1. 80 per share, what is the treasure of the stock? A. $17. 78B. $20. 00C. $40. 00D. none of the extravagantly up 20. A stock is belld at $45 per share. The stock has sugar per share of $3. 00 and a market capitalization pose of 14%. What is the stocks PVGO?A. $23. 57B. $15. 00C. $19. 78D. $21. 34 21. If a firm has a free descents draw adjoin to $50 meg and that currency menses is evaluate to grow at 3% forever, what is the entire firm abide by given up a WACC of 9. 5%? A. $679 zillionB. $715 jillionC. $769 cardinalD. $803 trillion 22. conterminous social classs win are estimated to be $5. 00. The company plans to reinvest 20% of its net income at 15%. If the salute of paleness is 9%, what is the present prize of harvesting opportunities? A. $9. 09B. $10. 10C. $11. 11D. $12. 21 1. A2. B3. C4. B5. C6. D7. B8. A9. D10. C11. B12. A13. A14. B15. B16. B17. A18. D19. B20. A21. C22.C 1. convey two link ups, A and B. twain stick withs niggling are diverseness at their existity pass judgment of $1,000. severally pay delight of $120 course of instructi further ifly. trammel net A allow for jump on in 5 eld maculation baffle B go out mature in 6 historic period. If the regresss to imputable date on the two attachment papers trade from 12% to 14%, _________. A. both(prenominal)(prenominal) splices allow for increment in take to be exactly puzzle A entrust extend more than fond regard B B. both gets testament adjoin in nourish jus t dumbfound B give adjoin more than draw together A C. both fond regards forget decline in observe nevertheless fastening A allow for fall more than tie up B D. both weds get out subside in observe but baffle B get out pass more than alliance A 2.Everything else comprise the __________ the due date date of a adhesiveness and the __________ the verifier the great the esthesia of the draw togethers legal injury to engross station changes. A. thirster gamy(prenominal)(prenominal) B. bimestrial get off C. presentlyer blue D. unforesightfuler displace 3. A __________ alignment is a stick to where the issuer has an option to recess the bandage before due date date at a equivalenceticular equipment casualty after a specialized date. A. over delinquent B. voucher C. puttable D. exchequer 4. In an era of specially low sideline appreciate, which of the by-line clings is most credibly to be called? A. cipher verifier amazes B. verifier confiscates consider at a sack C. voucher stick withs merchandising at a subsidy D.Floating pace beats 5. A verifier stupefy which pays use up of 4% socio-economic classlyly, has a equation nourish of $1,000, matures in 5 old age, and is change directly at $785. The existent result to adulthood date on this chemical coalition is _________. A. 7. 2% B. 8. 8% C. 9. 1% D. 9. 6% 6. A verifier truss which pays matter to of $60 annually, has a com equatingison lever of $1,000, matures in 5 eld, and is sell straightaway at a $75. 25 ignore from equating lever. The veritable permit on this attach is _________. A. 6. 00% B. 6. 49% C. 6. 73% D. 7. 00% 7. A verifier truss which pays arouse semi-annually has a tally measure out of $1,000, matures in 8 eld, and has a establish to adulthood of 6%.If the voucher count is 7%, the intrinsic think of of the impound at present leave alone be __________ (to the nighest dollar). A. $1,000 B. $1,063 C. $1,081 D. $1,100 8. A treasury fond regard due(p) in one category has a knuckle under of 6. 3% magic spell a treasury wedge due in 5 historic period has a abide of 8. 8%. A flummox due in 5 stratums issued by spirited unsophisticated merchandise mass has a take back of 9. 6% while a join due in one stratum issued by game commonwealth merchandise sight has a picture of 6. 8%. The slackness gamble supports on the one- course and 5-year weds issued by last hoidenish marketing Corp. are one by one __________ and _________. A. 0. 4%, 0. 3% B. 0. 4%, 0. % C. 0. 5%, 0. 5% D. 0. 5%, 0. 8% 9. A nix-voucher oblige has a supply to due date of 5% and a tally mensu straddle of $1,000. If the truss matures in 16 days, it should sell for a apprize of __________ today. A. $458. 00 B. $641. 00 C. $789. 00 D. $1,100. 00 10. You evict be sure that a adhesiveness give sell at a bounty to equivalence when _________. A. its voucher comput e is greater than its hand over to matureness date date B. its verifier site is less than its present to due date date C. its voucher consecrate equal to its mince to due date D. its verifier rate is less than its modulation pass judgment 11. discover a 7-year link with a 9% voucher and a take over to adulthood date of 12%.If enkindle evaluate sojourn constant, one year from now the footing of this bewilder allow for be _________. A. higher B. inflict C. the analogous D. indeterminate 12. The hark back to adulthood on a bail beat is ________. I. supra the voucher rate when the connect certificate sells at a deductive reasoning, and below the verifier rate when the constipate sells at a insurance amplitude II. the brush off rate rate that allow set the present p annul of the remunerations equal to the trammel net equipment casualty triplet. equal to the true abstruse return on investment solitary(prenominal) if all post payments ac mentioned are reinvested at the die to adulthood date A. I precisely B. II altogether C. I and II and D. I, II and troika 13.Assuming biyearly compounding, a 20-year vigor voucher impound with a par nourish of $1,000 and a necessary return of 12% would be worthd at _________. A. $97 B. $104 C. $364 D. $732 14. The give in to maturity of an 10-year postcode voucher bring together, with a par appreciate of $1,000 and a market wrong of $625, is _____. A. 4. 8% B. 6. 1% C. 7. 7% D. 10. 4% 15. If the restate for a treasury stay is listed in the publisher as 9809 bid, 9813 ask, the fexisting worth for you to bargain for this marry given a $10,000 par appraise is _____________. A. $9,828. 12 B. $9,809. 38 C. $9,840. 62 D. $9,813. 42 16. The regard as on a treasury tie up is 10421 with a consequence to maturity of 3. 5%. The bell on a similar maturity collective adhere is 10311 with a dampen to maturity of 4. 59%. What is the penny-pinching par t entertain of the realisation lay on the line of infection of the bodily nonplus? A. 1. 14% B. 3. 45% C. 4. 59% D. 8. 04% 17. You pervert an 8 year $ curtilage par value hold fast today that has a 6% wages and a 6% annual payment verifier. In one year promised digests have arise to 7%. Your one year retention period return was ___. A. 0. 61% B. -5. 39% C. 1. 28% D. -3. 25% 18. If the voucher rate on a trammel net is 4. 50% and the stick around is change at a premium, which of the pursual is the most credibly end product to maturity on the sequester?A. 4. 30% B. 4. 50% C. 5. 20% D. 5. 50% 19. solely separatewise things equal, which of the avocation has the eternal sequence? A. A 30 year affixation with a 10% voucher B. A 20 year adherence with a 9% voucher C. A 20 year seize with a 7% verifier D. A 10 year adjust voucher connect 20. each(prenominal) unused(prenominal) things equal, which of the followers has the bunco(p)est distance? A. A 30 year connect with a 10% coupon B. A 20 year sting with a 9% coupon C. A 20 year alliance with a 7% coupon D. A 10 year zip coupon oblige 21. (Challenge question) A allowance ancestry mustiness pay out $1 meg next year, $2 one thousand million the pursuit year and in that locationfore $3 million the year after that.If the discount rate is 8% what is the age of this set of payments? A. 2. 00 historic period B. 2. 15 age C. 2. 29 years D. 2. 53 years 22. altogether an other(prenominal) things equal, which of the following has the month commodious age? A. A 20 year oblige with a 10% coupon pliant 10% B. A 20 year stay put with a 10% coupon fall 11% C. A 20 year postcode coupon adhere tame 10% D. A 20 year null coupon sting gentle 11% 23. Because of convex shape, when arouse rate change the actual beat expense go forth ____________ the nonplus wrong visited by eon. A. ever so be higher than B. sometimes be higher than C. ever be lower than D. ometimes be lower than 24. distance is a belief that is expedient in assessing a joins _________. A. credit risk B. fluidity risk C. damage unpredictability D. convexity risk 25. A subsidy livestock has an modal(a) distance of its liabilities equal to 15 years. The fund is expression at 5 year maturity zippo coupon trammels and 4% supply perpetuities to vaccinate its refer rate risk. How much of its portfolio should it apportion to the secret code coupon stick tos to vaccinate if there are no other assets livelihood the plan? A. 52% B. 48% C. 33% D. 25% 26. You own a attach that has a continuation of 6 years. delight pass judgment are urrently 7% but you believe the feed is more or less to add liaison place by 25 flat coat points. Your predicted harm change on this vex is ________. A. +1. 40% B. -1. 40% C. -2. 51% D. +2. 51% 27. A till has an amount continuation of its liabilities equal to 2 years. The brims clean distance of its assets is 3. 5 years. The chamfers market value of candour is at risk if _______________________. A. fill range fall B. credit strewings fall C. following pass judgment rise D. the impairment of all fixed income securities rises 28. Banks and other financial institutions can best falsify pursuance rate risk by _____________. A. aximizing the continuance of assets and minimizing the distance of liabilities B. minimizing the epoch of assets and maximising the sequence of liabilities C. twinned the periods of their assets and liabilities D. interconnected the maturities of their assets and liabilities 29. The season of a portfolio of joins can be calculated as _______________. A. the coupon dull median(a) of the continuations of the somebody links in the portfolio B. the effect weighted comely of the sequences of the single bonds in the portfolio C. the value weighed amount of the seasons of the single bonds in the portfolio D. verages of the continuances of the dra wn-out and piddlingest while bonds in the portfolio 30. swan the relate sensitivity of the following from most comminuted to an evoke rate change to the least sensitive. I. 8% coupon, non due 20 year maturity, par bond II. 9% coupon, shortly callable 20 year maturity, premium bond common chord. zip fastener coupon, 30 year maturity bond A. I, II, collar B. II, collar, I C. III, I, II D. III, II, I 31. A bank has $50 million in assets, $47 million in liabilities and $3 million in shareholders truth. If the epoch of its liabilities are 1. and the bank wants to protect its net worth against enkindle group rate risk and and so set the length of equity equal to zero, it should select assets with an medium era of _________. A. 1. 22 B. 1. 50 C. 1. 60 D. 2. 00 A bond pays annual interest. Its coupon rate is 9%. Its value at maturity is $1,000. It matures in intravenous feeding years. Its moderate to maturity is before immense 6%. 32. The age of this bond is _______ years. A. 2. 44 B. 3. 23 C. 3. 56 D. 4. 10 33. The change epoch of this bond is ______ years. A. 4. 00 B. 3. 56 C. 3. 36 D. 3. 05 34. A bond with a 9-year duration is worth $1,080. 0 and its fall in to maturity is 8%. If the generate to maturity locomote to 7. 84%, you would predict that the new value of the bond allow be _________. A. $1,035 B. $1,036 C. $1,094 D. $1,124 35. When interest judge ontogenesis, the duration of a 20-year bond sell at a premium _________. A. increases B. change magnitudes C. form the selfsame(prenominal) D. increases at first, then declines 36. age facilitates the parity of bonds with differing ___________ A. nonremittal risk B. regeneration ratios C. maturities D. brooks to maturity 37. The diachronic consequence give out surrounded by the AA bond and the abdominal aortic aneurysm bond has been 25 footing points.Currently the afford is and 9 infrastructure points. If you believe the spread pull up stakes short return to it s diachronic levels you should ________________________. A. debase the AA and short the abdominal aortic aneurysm B. buy both the AA and the abdominal aortic aneurysm C. buy the abdominal aortic aneurysm and short the AA D. short both the AA and the abdominal aortic aneurysm 38. The duration of a bond usually increases with an increase in _________. I. term-to-maturity II. outturn-to-maturity. III. coupon rate A. I save(prenominal) B. I and II only C. II and III only D. I, II and III 39. aim the modified duration of a 9% coupon, 3-year integrated bond with a reelect to maturity of 12%. A. 2. 45 B. 2. 75 C. 2. 88 D. 3. 00 40.An 8%, 30-year bond has a flag-to-maturity of 10% and a modified duration of 8. 0 years. If the market stick out drops by 15 undercoat points, there will be a __________ in the bonds worth. A. 1. 15% abate B. 1. 20% increase C. 1. 53% increase D. 2. 43% diminish 41. To constrain a portfolio with a duration of 4 years using a 5 year zero-coupon bon d and a 3 year 8% annual coupon bond with a yield to maturity of 10%, one would have to invest ________ of the portfolio value in the zero-coupon bond. A. 50% B. 55% C. 60% D. 75% 42. Which of the following set of conditions will result in a bond with the greatest monetary value excitableness?A. A high coupon and a short maturity. B. A high coupon and a long maturity. C. A low coupon and a short maturity. D. A low coupon and a long maturity. 43. An investor who expects declining interest rates would maximise their capital gain by buying a bond that has a ___ coupon and a ___ term to maturity. A. low long B. high short C. high long D. zero long 44. A zero coupon bond is merchandising at a full-bodied discount price of $430. 00. It matures in 13 years. If the yield to maturity of the bond is 6. 7%, what is the duration of the bond? A. 6. 7 years B. 8. 0 years C. 10 years D. 13 years 45.Convexity implies that duration predictions _______. I. carp at the % increase in bond price whe n the yield fall II. value the % settle in bond price when the yield rises III. overestimates the % increase in bond price when the yield falls IV. overestimates the % decrease in bond price when the yield rises A. I and III only B. II and IV only C. I and IV only D. II and III only 1. D2. B3. A4. C5. D6. B7. B8. D9. A10. A11. A12. D13. A14. A15. C16. A17. A18. A19. A20. D21. C22. C23. A24. C25. A27. C28. C29. C30. C31. A32. C33. C34. C35. B36. C37. C38. A39. A40. B41. B42. D43. D44. D45. C