Reference no: EM132785910
Questions -
Q1. Let's assume that a government bond has a risk-free rate of 1.9%. If there is a 6.7% expected rate of return from the market, and a stock has a beta coefficient of 1.22, what is the expected return of the stock? Round to 1 decimal place.
a. 7.8%
b. 8.6%
c. 12.4%
d. 16.9%
Q2. You bought 100 shares of stock at a price of $73.44 per share. Over the last year, you have received total dividend income of $322. What is the dividend yield?
a. 4.3%
b. 4.5%
c. 5.6%
d. 4.4%
e. 23.8%
Q3. Consider the following statement and complete the sentence so that it is valid: In capital budgeting, it is important to _____ sunk cost and _____ opportunity cost.
a. include, include
b. include, ignore
c. ignore, include
d. ignore, ignore
Q4. Assume an S&P 500 investment has returns at 2.03% (2019), 6.06% (2020), 11.08% (2021), -7.32% (2022), and 23.54% (2023). What would the standard deviation be for this particular investment situation? Round to the hundredths place as you calculate.
a. 7.23%
b. 7.92%
c. 8.35%
d. 11.41%
e. 9.30%
Q5. Which of the following is true: As long as a firm has debt...
a. Return on assets (ROA) will always be less than return on equity (ROE).
b. ROA will always be higher than ROE.
c. ROA and ROE will be equal to each other.
d. ROA and ROE are not related to one another
Q6. Bonds are quite simple arrangements between bondholders and corporations, where corporations borrow money with the promise of a return as assurance to pay back bondholders in the future.
True
False
Q7. Assume a company borrows $40 million, where 40,000 bonds are issued to give the company the ability to borrow $1,000 per bond over the next 30 years. If each bond has a face value of $1,000 and coupon rate 5.3%, calculate the value of the bond one year later if the yield to maturity is changed to 4.8% (Assume coupon payments are semi-annual).
a. $1,000.00
b. $1,077.84
c. $1,079.06
d. $925.30
Q8. Assume a date of January 1, 2020, is the settlement date with a 12-year time to maturity, what is the yield if the coupon rate is 6.5%, and the bond price is $5,768.58? Assume semiannual compounding and the bond having a face value of $5,000.
a. 3.7%
b. 4.7%
c. 4.8%
d. 4.9%
e. 5%
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