How much did you borrow for your house if your monthly mortgage payment for a 30 year

mortgage at 6.65% APR is $1,600?

. . A $218,080

. . B. $202,503

. . C. $186,926

. . D. $233,658

. . E. $249,235

. . F. $264,812

.

Shady Rack Inc. has a bond outstanding with 9.75 percent coupon, paid semiannually, and 17

years to maturity. The market price of the bond is $1,042.43. Calculate the bond’s yield to

maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly

increases by 2% from your calculated YTM, what will be the percent change in the market price of

the bond?

. . A. -17.09%

. . B. -16.39%

. . C. -17.76%

. . D. -14.01%

. . E. -15.66%

. . F. -14.87%

.

Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7,

and $10 for the years 8-10. Thereafter, starting in year 11, the company will pay a constant

dividend of $5/year forever. If you require 12 percent rate of return on investments in this risk

class, how much is this stock worth to you?

. . A. $37.77

. . B. $34.54

. . C. $50.50

. . D. $45.68

. . E. $41.46

. . F. $55.99

.

Your required rate of return is 15%. What is the net present value of a project with the following

cash flows?

.

. Year . 0 . 1 . 2 . 3 . 4 . 5

. Cash Flow . -750 . 450 . 350 . 150 . 125 . -100

.

. . A. 26.33.

. . B. 72.15

. . C. 15.56

. . D. 60.27

. . E. 48.68

. . F. 37.37

.

Please use the following information for this and the following two questions.BB Lean has

identified two mutually exclusive projects with the following cash flows.

. Year . 0 . 1 . 2 . 3 . 4 . 5

. Cash Flow Project A -52,000.00 . 18,000.00 . 17,000.00 . 15,000.00 . 12,000.00 .

. Cash Flow Project B-52,000.00 . 17,800.00 . 10,000.00 . 12,000.00 . 17,000.00

0

The company requires a 11.5% rate of return from projects of this risk. What is the NPV of project

A?

. . A. 5,972.87

. . B. 417.37

. . C. 1,395.64

. . D. 1,624.90

. . E. 5,180.35

. . F. 972.57

.

What is the IRR of project B?

. . A. 12.06%

. . B. 12.94%

. . C. 13.05%

. . D. 20.80%

. . E. 13.90%

. . F. 14.68%

.

At what discount rate would you be indifferent between these two projects?

. . A. 3.1177%

. . B. 34.1306%

. . C. 13.5250%

. . D. 26.0812%

. . E. 14.7386%

. . F. 15.8950%

.

A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years

ago and has 7 years remaining to maturity. The current market price for the bond is $1,000.

Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 9.5%. III. The bond’s

current yield is 10%.

. . A. I, II Only

. . B. I, III Only

. . C. I, II, and III

. . D. III Only

. . E. I Only

. . F. II, III Only

.

Riverhawk Corporation has a bond outstanding with a market price of $1,250.00. The bond has

10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%. What is the

bond’s coupon rate?

. . A. 13.61%

. . B. 11.31%

. . C. 9.77%

. . D. 10.54%

. . E. 12.08%

. . F. 12.84%

.

You purchased a stock for $20 per share. The most recent dividend was $2.50 and dividends are

expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock?

. . A. 17.64%

. . B. 21.50%

. . C. 17.00%

. . D. 18.38%

. . E. 19.25%

. . F. 20.27%

.

Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six

years but the company will pay no dividends and reinvest all earnings. After that, the dividends

will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first

dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today?

. . A. $22.80

. . B. $15.96

. . C. $20.52

. . D. $25.08

. . E. $18.24

. . F. $13.68

.

Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share. Its dividends are expected to grow at

26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a

constant rate of 6% per year thereafter. What is the current market value of the ASI’s stock if

companies in this risk class have a 16% required rate of return?

. . A. $56.03

. . B. $48.35

. . C. $51.29

. . D. $45.54

. . E. $54.27

. . F. $42.87

.

The Retarded Company’s dividends are declining at an annual rate of 6 percent. The company

just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you

pay for this stock?

. . A. $13.85

. . B. $19.20

. . C. $17.09

. . D. $15.33

. . E. $12.57

. . F. $21.78

.

The dividend yield of a stock is 9 percent. If the market price of the stock is $18 per share and its

dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by

the company?

. . A. $1.36

. . B. $1.53

. . C. $1.02

. . D. $1.70

. . E. $1.19

. . F. $0.85

.Last year, Jen and Berry Inc. had sales of $45,000, cost of goods sold (COGS) of 12,000,

depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000.

The interest costs were $2,500. Twenty percent of SG&A costs are fixed costs. If its sales are

expected to be $60,000 this year, what will be the estimated SG&A costs this year?

. . A. $12,667

. . B. $12,000

. . C. $10,636

. . D. $11,500

. . E. $14,250

. . F. $13,250

.

You require a risk premium of 3.5 percent on an investment in a company. The pure rate of

interest in the market is 2.75 percent and the inflation premium is 3 percent. US Treasury bills

are risk free. What should be the yield of the US Treasury bills? Use multiplicative form.

. . A. 5.58%

. . B. 6.09%

. . C. 5.06%

. . D. 6.35%

. . E. 5.32%

. . F. 5.83%

.

Bonds X and Y are identical, including the risk class. The only difference between A and B is in the

coupon payment as shown below.

.

. . Bond X . Bond Y

. Face value . $1,000 . $1,000

. Annual Coupon Payment . $120 . $130

. Payment Frequency . Semiannual . Annual

. Years to maturity . 15 . 15

. Price . $919.43 . ?

.

.

. What is the price of bond Y?

. . A. $925.88

. . B. $940.92

. . C. $1,007.15

. . D. $956.95.

. . E. $973.44

. . F. $989.75

.

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