FIN 534 Week 5 Midterm Examination Part 2

FIN 534 Week 5 Midterm Examination Part 2

 

Review Test Submission: Week 5 Midterm Exam Part 2

 

Question 1

2 out of 2 points

 
Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

 

Question 2

2 out of 2 points

 
A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?

 

Question 3

2 out of 2 points

 
Which of the following statements regarding a 15-year (180-month) $225,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)

 

Question 4

2 out of 2 points

 
Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

 

Question 5

2 out of 2 points

 
You are considering two equally risky annuities, each of which pays $15,000 per year for 20 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?

 

Question 6

2 out of 2 points

 
Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

 

Question 7

2 out of 2 points

 
Which of the following statements is CORRECT?

 

Question 8

2 out of 2 points

 
A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT?

 

Question 9

2 out of 2 points

 
Which of the following statements is CORRECT?

 

Question 10

2 out of 2 points

 
Which of the following statements is CORRECT?

 

Question 11

2 out of 2 points

 
A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par ($1,000). Which of the following statements is NOT CORRECT?

 

Question 12

2 out of 2 points

 
Bonds A and B are 15-year, $1,000 face value bonds. Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, which is expected to remain constant for the next 15 years. Which of the following statements is CORRECT?

 

Question 13

2 out of 2 points

 
Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows:

T-bond = 7.72%          A = 9.64%
AAA = 8.72% BBB = 10.18%

The differences in rates among these issues were most probably caused primarily by:

 

Question 14

2 out of 2 points

 
Which of the following statements is CORRECT?

 

Question 15

 

 
Stock A’s beta is 1.7 and Stock B’s beta is 0.7. Which of the following statements must be true, assuming the CAPM is correct.

 

Question 16

 

 
Which of the following statements is CORRECT?

Question 17

 

 
Which of the following is most likely to be true for a portfolio of 40 randomly selected stocks?

 

Question 18

2 out of 2 points

 
Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur?

 

Question 19

2 out of 2 points

 
Which of the following statements is CORRECT?

 

Question 20

2 out of 2 points

 
Merrell Enterprises’ stock has an expected return of 14%. The stock’s dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share. Which of the following statements is CORRECT?

 

Question 21

2 out of 2 points

 
Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

X Y
Price $25 $25
Expected dividend yield 5% 3%
Required return 12% 10%

 

Question 22

 

 
Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B
Price $25 $25
Expected growth (constant) 10% 5%
Required return 15% 15%

 

Question 23

 

 
Which of the following statements is CORRECT?

 

Question 24

 

 
Which of the following statements is CORRECT?

 

Question 25

2 out of 2 points

 
The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the following statements is CORRECT?