Please answer in detail to help me prepare for exam. Any questions used in finan
ID: 2708909 • Letter: P
Question
Please answer in detail to help me prepare for exam. Any questions used in financial calaculator will you please explain each input (I use T.I BA II Plus) Thank you for the help
1) A $17,000 par value, fixed coupon bond with 7 years left until maturity and a coupon that is paid semi-annually is currently trading at an annual yield of 8.481% (that is, the bond’s current yield to maturity is 8.481%). If the price of the bond is $16,575.00, then the coupon rate is ____%.
2) A bond has a yield to maturity (YTM) of 9.00%. If the YTM decreases to 8.90%, then the price of the bond will_____.
A.increase
B.decrease
C.increase if the coupon is greater than 9.00%
D.decrease if the coupon is less than 9.00%
E.remain the same
3) Eight years ago, ABC Company issued fixed-coupon bond at discount with a yield to maturity of 9%. Today, the yield to maturity has increased to 9.5%. The bond is currently trading:
A. At par value (face value)
B. At a discount
C. At a premium
D. Not enough information to say
4) ABC Co. just paid a dividend of $1.75 (i.e., D0 = 1.75). The company is expected to experience abnormally high growth in the next two years and increase the dividend 50% each year. After that, the dividend will increase 30% between years 2 and 3. Finally, the dividend will remain constant from year 3 onward. Assuming a discount rate of 15%, compute the price of the stock.
5) Financial ratios for Firm A and Firm B are given below. Use the Extended DuPont Equation to determine which firm has a higher ROE.
Firm A Firm B
Net Profit Margin 0.84 0.91
Total Asset Turnover 1.15 1.02
Debt Ratio 0.35 0.35
A.Firm B has the higher ROE
B.Firm A has the higher ROE
C.Firm A and B have the same ROE
D.Firm A and B have the same Debt Ratio, therefore we can’t use the Extended DuPont Equation
6) Assume you may accurately value a stock by using the constant dividend growth model. All else equal an increase in the growth rate will result in ______ valuation of the stock.
A.a higher
B.a lower
C.the same
D.either a higher or lower
E.none of the above
7) Stock A has a beta of 1.5. Stock B has a beta of 0.9. Stock C has a beta of 1.2. If the economy goes into a recession and the stock market drops, which company would you prefer to own in your portfolio? (2009 Final Exam Question)
a. A
b. B
c. C
d. Not enough information to determine
e. A or C
Explanation / Answer
Price at beginning of year = SF1,000/SF1.50 = $666.67
Price at end of year = SF875.06/SF1.35 = $648.19
Interest received at end of year = SF60/SF1.35 = $44.44
Gain to U.S. investor = ($648.19 + $44.44 - $666.67)/$666.67 = +3.89%.