Solutions for Essentials of Corporate Finance 270 QUESTIONS AND CORRECT ANSWERS LATEST
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Solutions for Essentials of Corporate Finance 270 QUESTIONS AND CORRECT ANSWERS LATEST
Solutions for Essentials of Corporate Finance 270 QUESTIONS AND CORRECT ANSWERS LATEST
Solutions for Essentials of Corporate Finance 270 QUESTIONS AND CORRECT ANSWERS LATEST
Solutions for Essentials of Corporate Finance 270 QUESTIONS AND
CORRECT ANSWERS 2024-2025 LATEST
Which one of the following statements is correct concerning both he dollar return and the % return
on a stock investment?
1) the $ return is more accurate than the % return because the dollar return includes dividend
income while the % return does not
2) the $ return is dependent on the size of the investment while the % return is not
3) $ returns are based on capital gains while % returns are based on the total rate of return
4) the $ return considers the time value of money while the % return does not
5) $ returns must either be 0 or a positive value while % returns can be negative, 0 or positive -
ANSWER-3) $ returns are based on capital gains while % returns are based on the total rate of
return
Mary's 25th birthday is today, and she hopes to retire on her 65th birthday. She has determined that
she will need to have $1,000,000 in her retirement savings account in order to live comfortably. Mary
currently has no retirement savings, and her investments will earn 7% annually. How much must she
deposit into her account at the end of each of the next 40 years to meet her retirement savings goal?
- ANSWER-$5009.14
Generally speaking, bonds issued in the U.S. pay interests on a ______________ basis -
ANSWER-semiannual
what provides compensation to a bondholder when a bond is not readily marketable at its full value?
- ANSWER-liquidity premium
which bond rating signals the greatest default risk?
1) BB
2) B
3) AAA
4) A - ANSWER-2) B
the inflation premium:
1) compensates investors for inflation risk
,2) increases the real return
3) is inversely related to the time to maturity
4) remains constant over time
5) compensates investor for potential bond price decline - ANSWER-1) compensates investors for
inflation risk
the term structures of interest rates represents the relationship between which of the following?
1) market and coupon rates on default-free, pure discount bonds
2) nominal rates on default-free, pure discount bonds and time to maturity
3) real rates on risk-free and risky-bonds
4) nominal rates on risk-free and risky-bonds
5) nominal and real rates on default-free, pure discount bonds - ANSWER-2) nominal rates on
default-free, pure discount bonds and time to maturity
a bonds value in the market equals the:
1) sum of all interest and principal payments
2) discounted sum of all interest and principal payments, where the discount rate is equal to the
yield to maturity
3) sum of interest payments
4) bond's face value - ANSWER-2) discounted sum of all interest and principal payments, where
the discount rate is equal to the yield to maturity
a person who executes orders to buy and sell securities on behalf of his of her clients on the floor of
the NYSE is called a : - ANSWER-broker
an agent who buy and sells securities from inventory is called a : - ANSWER-dealer
donuts delete just paid an annual dividend of $1.10 a share. The firm expects to increase this
dividend by 8% per year the following three years and then decrease the dividend growth to 2%
annually thereafter. Which one of the following is the correct computation of the dividend for year 5.
a stocks price today is $36.75 and is expected to pay out a dividend of $0.95 per share in one year.
What is the stock's expected dividend yield? - ANSWER-.0259
dividend yield= D1/P0
the preferred stock company XYZ pays preferred stock dividend of $2 each year, assuming the
required rate of return is 9%, what is the price of this preferred stock in $? - ANSWER-$22.22
preferred stock price= dividend/ required rate of return
an investor purchased a stock for $41.63 and sold it one year later for $49.93. The investor also
received a dividend payment of $0.20. What was the investors realized capital gain? - ANSWER-
.1994
Realized Capital gain: P1/P0 - 1
Bavarian Sausage is expected to pay a dividend of $1 per share at the end of the year, and that
dividend is expected to grow at a constant rate of 5% per year in the future. The company's beta is
1.6, the market risk premium is 6%, and the risk-free rate is 3%. What is the company's current stock
price in $? - ANSWER-$25.00
( i don't think i got this one right)
investors require a 3% return on risk-free investments. On a particularly risky investment, investors
requires an excess return of 7% in addition to the risk-free rate of 3%. what is this excess return
called? - ANSWER-risk premium
when a bond's yield to maturity is higher than the bond's coupon rate, the bond is selling at a
_____________ - ANSWER-discount
, t or f: all else equal investors demand higher yields on corporate bonds with greater default risk -
ANSWER-true
what refers to the relationship between nominal returns, real returns, and inflation? - ANSWER-
fisher effect
t or f: interest rates always increase as the length of time until repayment increases - ANSWER-
false
what is the price of a 5-year bond with a 5% annual coupon with a yield to maturity of 7% -
ANSWER-918
N= # of coupons
I/Y= yield to maturity
PV (bond price) =?
PMT= coupon rate * 1000
dividends are best defined as:
1) cash or stock payments to either bondholders or shareholder
2) distributions of stock to current shareholder
3) cash or stock payments to shareholders
4) cash payments to either bondholders or shareholder
5) cash payments to shareholders - ANSWER-3) cash or stock payments to shareholders
Delfino's expects to pay an annual dividend of $1.50 per share next year. What is the anticipated
dividend for Year 3 if the firm increases its dividend by 2 percent annually? - ANSWER-$1.50 *
(1.02)^2
what is the name given to the model that computes the present value of a stock by dividing next
year's annual dividend amount by the difference between the discount rate and the rate of change in
the annual dividend amount? - ANSWER-dividend growth model
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