Finance 516 final exam
Suppose the September CBOT Treasury bond futures contract has a quoted price of 89.04. What is the implied
annual interest rate inherent in this futures contract? Assume this contract is based on a 20 year
with semi-annual interest payments. The face value of the bond is $1000, and the semi-annual coupon payment
are $30. The annual coupon rate on the bonds is $60 per bond (or 6%). The futures contract has 100 bonds.
a) 7.02%
b) 6.99%
c) 5.23%
d) 8.23%
(Points : 20)
Quote: 89.04
N=40
PV=(0.89 x 1000) + (0.04/32 x 1000)= -
$891.25 FV=$1000
PMT=$30
CPT I/YR=3.51
Annual rate = I/YR x 2 =
7.02 So the answer is (a)
(7.02%)
Question 2.2. (TCO D) Which of the following statements is most correct?
(a) In a private placement, securities are sold to private (individual) investors rather than to
institutions.
(b) Private placements occur most frequently with stocks, but bonds can also be sold in a
private placement.
(c) Private placements are convenient for issuers, but the convenience is offset by higher
flotation costs.
(d) The SEC requires that all private placements be handled by a registered investment
banker.
(e) Private placements can generally bring in funds faster than is the case with public
offerings. (Points : 20)
Question 3.3.
Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $12,000,00
bank loan to finance service equipment. The loan has an interest rate of 12percent and would be amortized
over five years, with five end-of-year payments. Sutton can also lease the equipment for 5 end-of-year payments
of $2,70,000 each. How much larger or smaller is the bank loan payment than the lease payment?
the loan payment from the lease payment.
a) (628,917)
b) (37,975)
c) (725,124)
d) (33,472)
This study source was downloaded by 100000832558064 from CourseHero.com on 01-19-2022 13:00:16 GMT -06:00
https://www.coursehero.com/file/14717142/Finance-516-final-exam/
, Finance 516 final exam
(Points : 20)
This study source was downloaded by 100000832558064 from CourseHero.com on 01-19-2022 13:00:16 GMT -06:00
https://www.coursehero.com/file/14717142/Finance-516-final-exam/
Suppose the September CBOT Treasury bond futures contract has a quoted price of 89.04. What is the implied
annual interest rate inherent in this futures contract? Assume this contract is based on a 20 year
with semi-annual interest payments. The face value of the bond is $1000, and the semi-annual coupon payment
are $30. The annual coupon rate on the bonds is $60 per bond (or 6%). The futures contract has 100 bonds.
a) 7.02%
b) 6.99%
c) 5.23%
d) 8.23%
(Points : 20)
Quote: 89.04
N=40
PV=(0.89 x 1000) + (0.04/32 x 1000)= -
$891.25 FV=$1000
PMT=$30
CPT I/YR=3.51
Annual rate = I/YR x 2 =
7.02 So the answer is (a)
(7.02%)
Question 2.2. (TCO D) Which of the following statements is most correct?
(a) In a private placement, securities are sold to private (individual) investors rather than to
institutions.
(b) Private placements occur most frequently with stocks, but bonds can also be sold in a
private placement.
(c) Private placements are convenient for issuers, but the convenience is offset by higher
flotation costs.
(d) The SEC requires that all private placements be handled by a registered investment
banker.
(e) Private placements can generally bring in funds faster than is the case with public
offerings. (Points : 20)
Question 3.3.
Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $12,000,00
bank loan to finance service equipment. The loan has an interest rate of 12percent and would be amortized
over five years, with five end-of-year payments. Sutton can also lease the equipment for 5 end-of-year payments
of $2,70,000 each. How much larger or smaller is the bank loan payment than the lease payment?
the loan payment from the lease payment.
a) (628,917)
b) (37,975)
c) (725,124)
d) (33,472)
This study source was downloaded by 100000832558064 from CourseHero.com on 01-19-2022 13:00:16 GMT -06:00
https://www.coursehero.com/file/14717142/Finance-516-final-exam/
, Finance 516 final exam
(Points : 20)
This study source was downloaded by 100000832558064 from CourseHero.com on 01-19-2022 13:00:16 GMT -06:00
https://www.coursehero.com/file/14717142/Finance-516-final-exam/
