Exam (elaborations)
FP13 Quiz Questions 2024
- Course
- Institution
FP13 Quiz Questions 2024
[Show more]
Seller
Follow
stuviaexam
Content preview
FP13 Quiz QuestionsA 7% coupon bond pays interest semiannually and has a duration of 12 (computed
using semiannual compounding) and a maturity of 25 years. The bond sells for
$1,100 and has a YTM of 6.2%. If the YTM is expected to increase by 50 basis
✅✅
points, by what percentage can the price of the bond be expected to change? -
--12 (0.005/1.031)= -0.0582
You are considering purchase of a stock that is currently selling for $23 and pays a
dividend of $1.15 per share. The dividend is expected to grow at a rate of 15% per
year for the next three years. After that, the dividend is expected to grow at a
✅✅
constant rate of 8%. Your required return is 13%. The maximum price you should
pay for this stock is - -13
I/YR
0CF0
1.3225CF1
1.5209CF2
1.7490 + 37.7784CF3
29.7559 SHIFT, NPV
The 37.7784 is calculated from the constant growth DDM, starting at the end of the
third year: [1.7490(1.08)] ÷ (0.13 - 0.08) = 37.7784
Kevin owns a $1,000 par value corporate bond with three years remaining until
maturity. This bond is currently trading for $1,020.91. The bond has a coupon rate of
✅✅
4.5% (annual coupon payments) and a current YTM of 3.75%. What is the duration
of this bond? - -For year 1, FV = 45, I/YR = 3.75, N = 1, solve for PV(43.37) For
year 2, change N to 2 without clearing your calculator and solve for
PV(41.81xyears2). For year 3, FV = 1,045, I/YR = 3.75, N = 3, solve for
PV.(935.73xyears3)=2807.9 add all three together
Divide the sum in the last column ($2,934.18) by the total PV/market price of the
bond ($1,020.91) to derive the duration of 2.8741 years.
Assume a $1,000 par value bond with 3 years until maturity is currently trading for
$1,027.23. The bond has a coupon rate of 6% (annual coupon payments) and a
current YTM of 5%. The bond has a duration of 2.51 years. Calculate what the new
✅✅
market price for the bond would be if the YTM changed from 5% to 4.5%. -
-The new price of the bond should be $1,041.23.
FV = 1,000
PMT = 60
I/YR = 4.5
N=3
Solve for PV = -1,041.2345, or $1,041.23
, which of the following is considered to be both liquid and marketable? - ✅✅ -U.S.
Treasury bills are both liquid and marketable. Passbook savings accounts are liquid
but not marketable. Neither blue-chip stocks nor antique jewelry is assured of being
both liquid and marketable.
Identify which of the following statements pertaining to the various types of money
market investments is CORRECT.
-Commercial paper offers higher yields than T-bills.
-Eurodollars are U.S. dollar-denominated deposits at banks outside of the United
States.
-Banker's acceptances are short-term drafts drawn by a private company on a major
✅✅
bank to finance imports and exports.
-T-bills are subject to default risk and a lack of marketability. - -Only statement
IV is incorrect. T-bills are not subject to default risk and exhibit a high degree of
marketability. As a result, the 90-day T-bill is often used as a proxy for the risk-free
investment.
✅✅
Which of the following statements best describes banker's acceptances? -
-Banker's acceptances are typically traded at a discount from their face value in
the secondary market. Eurodollars are U.S. dollar-denominated deposits at banks
outside the United States.
✅✅
All of the following statements correctly describe certificates of deposit (CDs) except
- -CDs typically pay a fixed interest rate, with higher interest rates offered for
longer-term certificates.
Which of the following statements best describes Eurodollars? - ✅✅
-B)
U.S. dollar-denominated deposits at banks outside the United States
-in millions maturity less than six months
n investor holding a Treasury bill as of the date of maturity includes - ✅✅ -An
investor holding a Treasury bill as of the date of maturity includes the amount of the
discount as ordinary income. An investor who sells the bill before maturity includes
as ordinary income only a portion of the acquisition discount based on the total time
he held the bill. The remaining portion is capital gain income.
A money market mutual fund manager recently purchased negotiable, short-term,
unsecured promissory notes issued by a number of large corporations for the
✅✅
portfolio. Select the type of investment the money manager purchased. -
-Commercial paper is usually issued in denominations of $100,000 or more
and is a substitute for short-term bank financing. Commercial paper is normally sold
at a discount and is rated for quality by a rating service.
Limited partnerships are distinguished by which of the following?
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller stuviaexam. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.85. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
74735 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now