Reference no: EM132019124

1. Smirnoff Inc. (symbol SMNF) is expected to pay a dividend of $2.00 per share while Southern Comfort Inc (Symbol SOCO) just paid dividends of $3.70 per share. Assume that the growth rate for both are 11.5% for ever. The rate of return for SMNF is 20% while the rate of return for SOCO is 18% Calculate Po:

A.        Po for SMNF is $22      Po for SOCO is $58

B.        Po for SMNF is $22      Po for SOCO is $60.9

C.        Po for SMNF is $23.5    Po for SOCO is $56.923

D.        Po for SMNF is $23.5    Po for SOCO is $63.5

E.         None of the above.

2. A bond with a 5 percent coupon that pays interest semiannually and is priced at par will have a market price of _____ and interest payments in the amount of _____ each.

A.        $1,005; $50

B.        $1,050; $25

C.        $1,050; $50

D.        $1,000; $50

E.         $1,000; $25

3. The ELL common stock pays an annual dividend of $1.90 a share and is committed to maintaining a constant dividend. How much are you willing to pay for one share of this stock if your required return is 11 percent?

A.        $15.56

B.        $16.67

C.        $17.27

D.        $18.88

E.         $20.00

4. The Rose Shoppe offers 10-year, 8 percent coupon bonds with semiannual payments and a yield to maturity of 8.24 percent. What is the market price of a $1,000 face value bond?

A.        $990.32

B.        $983.86

C.        $1,108.16

D.        $1,521.75

E.         $591.04

5. Antonio's offers a 10-year bond that has a coupon rate of 5 percent and semiannual payments. The face value is $1,000 and the yield to maturity is 12.6 percent. What is the current value of this bond?

A.        $273.09

B.        $580.92

C.        $574.56

D.        $605.92

E.         $854.46

6. A General Co. bond has a coupon rate of 7 percent and pays interest annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to maturity?

A.        6.59%

B.        6.81%

C.        7.00%

D.        7.04%

E.         7.12%

7. Webster's has a 12-year bond issue outstanding that pays a coupon rate of 6.5 percent. The bond is currently priced at $938.76 and has a par value of $1,000. Interest is paid semiannually. What is the yield to maturity?

A.        7.27%

B.        7.80%

C.        8.01%

D.        14.56%

E.         14.07%

8.         Your firm offers a 20-year, semiannual coupon bond with a yield to maturity of 8.35 percent, a face value of $1,000, and a market price of $1,054. What is the coupon rate?

A.        8.91%

B.        4.46%

C.        17.64%

D.        8.82%

E.         17.82%

9. Bin Restaurant Corp stock has a market price of $18. If it has a yearly dividend of $2.50, what is your expected rate of return if you purchase the stock at its market price?

a.         .072%

b.         7.2%

c.         13.89%

d.         15.15%

10. Your father bought 100 shares of john deere’s common stock in 1982 for $1.45. He sold it in 2011 at $72.23. What is the rate of return he earned on this investment?

A.    2000%

B.     3000%

C.     4881%

D.    5880%

E.     0%