Which of the following bond has a coupon rate that is greater than the market yield?
Premium
For which type of bond does the bond issuer retain the interest rate risk?
Floating-rate bonds
Which of the following two stocks provide the least amount of risk reduction?
Stocks A&C: Correlation=1.0
Calculate the value of a non-callable 10-year bond with a face value of $1,000 and a coupon rate of 6% compounded semi-annually if you expect 4% yield on the bond.
$1,164
Calculate the real rate of return of a 10 year treasury based on the following information:
Nominal 10 year treasury yield: 4.00%
Inflation: 3.0%
Federal funds rate: 0.05%
1.0%
Calculate the taxable equivalent bond yield of a municipal bond with an interest rate of 10% for an investor in the 30% tax bracket.
14.29%
There are five different bonds, each with a face value of $1,000 and time to maturity of 10 years. All else equal, which of the following has the shortest duration?
Bond 1: Coupon rate=2%
Bond 2: Coupon rate= 6%
Bond 3: Coupon rate=5%
Bond 4: Coupon rate=
Bond 4
If you hold a bond with a fixed coupon rate and the Federal Reserve decides to lower interest rates, what happens to the value of your bond?
Increase
What is the weighted average cost of capital for the company listed below?
Debt: $200,000
Equity: $400,000
Cost of debt: 4%
Cost of equity: 6%
Tax rate: 40%
4.80%
A 10-year, 6% bond pays semi-annual coupon payments. If the face value is $1,000 but the bond sells for $751, what is the annualized yield on the bond?
NOT 5%
Calculate the value of a zero coupon 20-year bond (semi-annual) with a face value of $1,000. Assume the market rate is 1.25%.
...
Nick is in the 37% tax bracket and he holds a municipal bond that pays a tax-exempt interest rate of 5%. What is the taxable equivalent bond yield?
7.94%
With hedging, an investor________:
Fixes the sale price of an asset
What is true about derivative securities?
Derivative markets are often more efficient than the spot markets
A record company bought the rights to an artist's music catalogue and they expect to receive royalty payments of $25,000 per year forever (a perpetuity). What is this cash flow worth? Assume interest rates are 6.3%.
...
A company has a 5% bond that has a face value of $1000 and matures in 24 years. Assume that coupon payments are made semi-annually. The bonds can be called after 10 years at a premium of 4% over face value. What is the value of the bond if rates drop imme
A) $1,201
Which of the following is true regarding stock valuation?
Profits and stock values have a direct relationship.
Given the following information, calculate the time value of the call option on Microsoft's stock:
Current stock price of Microsoft's stock: $40
Strike price of option on Microsoft's stock (expires in 3 months): $35
Market price of 3-month option on Micro
$5
Given the following information, calculate the stockholder's return:
Beginning Price: $50
Ending Price: $65
Dividends Paid: $2
34%
If Company A's stock price is currently $39.50 and the intrinsic value is $28, what should you do as an investor?
Sell the stock if you own it because the stock is currently overvalued