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Question 1.1. A bond pays semiannual coupon payments of $30 each. It matures in 20 years and is selling for $1,200. What is the firm's cost of debt if the bond's par value is $1,000? (Don't forget this is a semiannual coupon.) (Points : 1) 2.23% 4.48% 1.80% 3.60% Question 2.2. If an investor purchases a share of stock for $300, collects a dividend during the year equal to $35 a share, and sells the stock at the end of the year for $289, what is the investor's return for the year? (Points : 1) 12.11% 8.30% 8.00% 15.33% Question 3.3. Which of the following is true regarding market risk? (Points : 1) It is measured by beta. It is also called nondiversifiable risk. It is also called systematic risk. all of the above Question 4.4. Which of the following statements regarding the cost of debt is true? (Points : 1) The cost of debt for bonds equals the coupon rate of outstanding bonds. The cost of debt for bonds is found by dividing the price by the annual coupon. The cost of debt for bonds is found by calculating their yield to maturity. The cost of debt equals the flotation costs charged by investment bankers who advise the firm. Question 5.5. Which of the following statements regarding the cost of equity is true? (Points : 1) It can be estimated in three different ways. It is always estimated using the present value of future dividends approach. It is estimated by solving for the discount rate for a perpetuity. It is generally lower than the cost of debt because equity holders are paid after taxes are paid. Question 6.6. Using the Capital Asset Pricing Model, estimate the required rate of return for Caterpillar Incorporated stock if the company's beta is 1.87 (as of February 1, 2013). Use a risk-free rate of 3% and a market risk premium of 6%. (Points : 1) 8.61% 11.22% 14.22% 16.83% Question 7.7. Which of the following is beta is used for? (Points : 1) estimating a regression line estimating a firm's total risk to be used in the WACC estimating a firm's market risk and used with the CAPM estimating the amount of leverage used by the firm Question 8.8. In the Capital Asset Pricing Model, the market risk premium is best approximated by: (Points : 1) the most recent one-year return on the S&P 500 Index (or another market index). the long-term historic return on a stock market index such as the S&P 500 (or another market index). the long-term average spread of the S&P 500 (or another market index) over the yield of long-term government bonds. the return of the S&P 500 (or another market index) over the current yield of long-term government bonds. Question 9.9. Suppose a zero-coupon bond is selling for $614.00 today. It promises to pay $1,000 in exactly 10 years with annual compounding. What is the firm's after-tax cost of debt if this is its sole debt outstanding (assuming the firm is in the 20% tax bracket)? (Points : 1) 4% 5% 6% 7% Question 10.10. We assume investors are risk averse, and therefore they: (Points : 1) are equally concerned with upside potential and downside risk. expect a higher return for bearing more risk. will pay more for an investment with higher risk. have very high required rates of return.
Suppose the following information over a five year period: Estimate which stock has higher risk-adjusted returns when using the Sharpe index.
in your analysis of dbm corporation you find that the current earnings per share are 5.00 per share and most analysts
Calculate the salary at the end of 24th year from now from the facts and what will 80% of your last year's salary be
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the following performance information given to youbenchmark portfoliojoes portfoliokims
Rand Co.'s current rate of return (ROE) is 14%. It pays out(payout ratio) half of its earnings as dividends. Current book value is $50 per share. Book value per share will grow as Rand reinvests earnings.
The other way around: you invest $60 into stocks of L. By combining a stock purchase of U and deposit/loan, provide a optional strategy that provides the same profits.
What are the key internal and external factors that must considered when designing a control system for organizations? How have control systems been changed by Sarbanes-Oxley requirements?
What is the return on equity for Firm A and Firm B?
Suppose 2-year Treasury bonds yield 4.25%, while 1-year bonds yield 3.05%. r* is 2%, and the maturity risk premium is zero.
donner inc will finance a proposed investment by issuing new securities while maintaining its optimal capital structure
What is the liquidity premium (LP) on Niendorf's bonds?
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