FINA 3770 EXAM 2 NEWEST 2025 EXAM COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+||BRAND NEW!!
A communications company pays annual dividends of $8.50 with no possibility
of it changing in the next several years. If the firm's stock is currently selling at
$60.71, what is the required rate of return? - ANSWER-14%
.A consol, issued by the British government to finance the Napoleonic Wars is an
example of: - ANSWER-perpetuity
.A corporate bond's coupon rate is the annual coupon payment divided by: -
ANSWER-the bond's face value.
.A preferred stock would be an example of: - ANSWER-perpetuity
.Alice Trang is planning to buy a six-year bond that pays a coupon of 10 percent
semiannually. Given the current price of $878.21, what is the yield to maturity
on these bonds? - ANSWER-13%
.Ambassador Corp. sells household cleaners producing a revenue stream that
has remained unchanged in the last few years. The firm does not expect any
change in its earnings or dividends for the next several years. The stock is
currently selling at $46.88. If the required rate of return is 16 percent, what is
the dividend paid by this company? - ANSWER-7.50
.An investment pays 18 percent interest compounded quarterly. What is the
effective annual interest rate? - ANSWER-19.3%
,.Anna will receive $15,000 from a bank deposit in 2 years which has an interest
rate of 3.5%. The amount of $15,000 represents the: - ANSWER-future value
.Assume that you are considering the purchase of a stock which will pay
dividends of $4.50 during the next year. Further assume that you will be able to
sell the stock for $85.00 one year from today and that your required rate of
return is 15 percent. How much would you be willing to pay for the stock today?
- ANSWER-77.83
.Bond contracts include specific terms, including all of the following EXCEPT -
ANSWER-the price at which the bond will be sold in the bond market.
.Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing
to invest $320,000 in an account earning 11 percent annually. What will be the
annual scholarship that can be given from this investment? - ANSWER-35,200
.Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The
interest rate for similar bonds is currently 9 percent. Assuming annual
payments, what is the present value of the bond? - ANSWER-872
.Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it
expects its dividend to grow at 7 percent for the next four years. What is the
present value of dividends over the next five-year period if the required rate of
return is 10 percent? - ANSWER-10.76
.Dawson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5
percent. It plans to repay the loan in eight equal installments, beginning in a
year. What is its annual loan payment? - ANSWER-4,939
, .Direct search markets are characterized by: - ANSWER-private placement
transactions and sale of common stock of small private companies.
.Foodelicious Corp. is evaluating whether it should take over the lease of an
ethnic restaurant in Manhattan. The current owner had originally signed a 25-
year lease, of which 16 years still remain. The restaurant has been growing
steadily at a 7 percent growth for the last several years. Foodelicious Corp.
expects the restaurant to continue to grow at the same rate for the remaining
lease term. Last year, the restaurant brought in net cash flows of $310,000. If
the firm evaluates similar investments using a15 percent discount rate, what is
the present value of this investment? - ANSWER-2,838,182
.Generic Inc. issued bonds in 1988 that will mature 16 years from the date of
issue. The bond pays a 14.375 percent coupon and the interest is paid
semiannually. Its current price is $1,508.72. What is the effective annual yield
on the bonds? - ANSWER-8.68%
.Giant Electronics is issuing 20-year bonds that will pay coupons semiannually.
The coupon rate on this bond is 7.8 percent. If the market rate for such bonds is
7 percent, what will the bonds sell for today? - ANSWER-1,085
.Growth stocks usually do not pay dividends. Therefore the stock value
increases because the firms: - ANSWER-reinvests earnings to provide dividends
in the future.
.If a bond's coupon rate is equal to the market rate of interest, then the bond
will sell: - ANSWER-at a price equal to its face value.
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+||BRAND NEW!!
A communications company pays annual dividends of $8.50 with no possibility
of it changing in the next several years. If the firm's stock is currently selling at
$60.71, what is the required rate of return? - ANSWER-14%
.A consol, issued by the British government to finance the Napoleonic Wars is an
example of: - ANSWER-perpetuity
.A corporate bond's coupon rate is the annual coupon payment divided by: -
ANSWER-the bond's face value.
.A preferred stock would be an example of: - ANSWER-perpetuity
.Alice Trang is planning to buy a six-year bond that pays a coupon of 10 percent
semiannually. Given the current price of $878.21, what is the yield to maturity
on these bonds? - ANSWER-13%
.Ambassador Corp. sells household cleaners producing a revenue stream that
has remained unchanged in the last few years. The firm does not expect any
change in its earnings or dividends for the next several years. The stock is
currently selling at $46.88. If the required rate of return is 16 percent, what is
the dividend paid by this company? - ANSWER-7.50
.An investment pays 18 percent interest compounded quarterly. What is the
effective annual interest rate? - ANSWER-19.3%
,.Anna will receive $15,000 from a bank deposit in 2 years which has an interest
rate of 3.5%. The amount of $15,000 represents the: - ANSWER-future value
.Assume that you are considering the purchase of a stock which will pay
dividends of $4.50 during the next year. Further assume that you will be able to
sell the stock for $85.00 one year from today and that your required rate of
return is 15 percent. How much would you be willing to pay for the stock today?
- ANSWER-77.83
.Bond contracts include specific terms, including all of the following EXCEPT -
ANSWER-the price at which the bond will be sold in the bond market.
.Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing
to invest $320,000 in an account earning 11 percent annually. What will be the
annual scholarship that can be given from this investment? - ANSWER-35,200
.Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The
interest rate for similar bonds is currently 9 percent. Assuming annual
payments, what is the present value of the bond? - ANSWER-872
.Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it
expects its dividend to grow at 7 percent for the next four years. What is the
present value of dividends over the next five-year period if the required rate of
return is 10 percent? - ANSWER-10.76
.Dawson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5
percent. It plans to repay the loan in eight equal installments, beginning in a
year. What is its annual loan payment? - ANSWER-4,939
, .Direct search markets are characterized by: - ANSWER-private placement
transactions and sale of common stock of small private companies.
.Foodelicious Corp. is evaluating whether it should take over the lease of an
ethnic restaurant in Manhattan. The current owner had originally signed a 25-
year lease, of which 16 years still remain. The restaurant has been growing
steadily at a 7 percent growth for the last several years. Foodelicious Corp.
expects the restaurant to continue to grow at the same rate for the remaining
lease term. Last year, the restaurant brought in net cash flows of $310,000. If
the firm evaluates similar investments using a15 percent discount rate, what is
the present value of this investment? - ANSWER-2,838,182
.Generic Inc. issued bonds in 1988 that will mature 16 years from the date of
issue. The bond pays a 14.375 percent coupon and the interest is paid
semiannually. Its current price is $1,508.72. What is the effective annual yield
on the bonds? - ANSWER-8.68%
.Giant Electronics is issuing 20-year bonds that will pay coupons semiannually.
The coupon rate on this bond is 7.8 percent. If the market rate for such bonds is
7 percent, what will the bonds sell for today? - ANSWER-1,085
.Growth stocks usually do not pay dividends. Therefore the stock value
increases because the firms: - ANSWER-reinvests earnings to provide dividends
in the future.
.If a bond's coupon rate is equal to the market rate of interest, then the bond
will sell: - ANSWER-at a price equal to its face value.
