homework 78

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timer Asked: Jul 3rd, 2018
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Question description

NO PLAGIARISM PLZ

there are two files to be answered

some of the questions

  1. Which of the following is NOT a type of long-term debt?
    1. mortgage bonds
    2. debentures
    3. debenture bonds
    4. commercial paper
  2. What is the current price of a bond issued by Dundee International which pays a semiannual coupon rate of 6 8/9%? The bond matures in 5 years and the required return on investments of similar risk is 6.5%.

the rest are in files

Instructor: Homework FIN 3343 Name__________________________ Please select the best choice from the answer choices given. 1. Which of the following is NOT a type of long-term debt? a. mortgage bonds b. debentures c. debenture bonds d. commercial paper 2. What is the current price of a bond issued by Dundee International which pays a semiannual coupon rate of 6 8/9%? The bond matures in 5 years and the required return on investments of similar risk is 6.5%. 3. Maxine Corp has a 5 1/8% coupon bond outstanding in 2004. The bond matures on April 1 in the maturity year. Suppose an investor bought this bond on April 1, 1999 and assume that interest is paid annually on April 1. Calculate the yield-to-maturity assuming the investor buys the bond at 105, as quoted in the financial press. 4. A “junk bond” is a term used to describe a bond that a. is in default b. is rated Ba or lower c. is currently paying interest d. has been downgraded by Moody’s 5. _____________________________are not secured by specific assets. 1 Instructor: 6. Determine the expected inflation rate if the nominal rate of return is 10% and the real rate of return is 7%. 7. You just purchased a bond for 99.35. It matures in 12 years and pays a coupon of 8 3/7% semiannually. What return can you expect to earn if you hold it until maturity? 8. The ____ the investor's required rate of return on a bond, the ____ will be the value of the bond to the investor. 9. A sinking fund allows the issuer to a. redeem an entire debt issue prior to maturity b. purchase a portion of the debt each year in the open market or call a portion of the debt for mandatory redemption c. call the entire debt issue d. accumulate interest expenses into a sinking fund account 10. How many years are left until maturity of a bond that is selling for $916.95? The coupon rate of the bond is 8 percent, interest is payable semiannually, and the current market rate of return on a similar risk bond is 10 percent. 2
Instructor: FIN 3343 Homework Name_______________________ Answer the questions showing all of your work. 1. In general, which of the following is NOT a right of holders of a firm’s common stock? a. asset rights b. preemptive rights c. voting rights d. preferred dividend rights 2. Troglin Industries is a dividend paying company. They just paid a dividend of $0.98 to their shareholders. Their dividends and earnings have been growing at 3% and are expected to continue growing at this rate in the foreseeable future. If you require a return of 12%, what is the value of this stock to you? a. $11.22 b. $10.89 c. $8.41 d. $32.67 3. Troglin Industries also has 200,000 shares of preferred stock outstanding. They are required to pay preferred dividends before they can pay dividends to their common stock shareholders. The par value of their preferred stock is $50. It pays a fixed dividend of 3.25%. You require a 12% rate of return. What is the value of a share of Troglin preferred stock? a. $27.08 b. $13.54 c. $416.67 d. $6.77 4. Stockholders' equity includes all of the following except: a. Common stock at par b. Treasury stock c. Contributed capital in excess of par d. Retained earnings 5. The market value of common stock is primarily based on a. the firm's future earnings b. book value c. total assets d. retained earnings 6. In the constant-growth dividend valuation model, the required rate of return must be ____ the dividend growth rate in order for the formula price to be meaningful. a. less than b. equal to c. greater than 1 Instructor: d. proportional to 7. Many preferred stocks are treated as ____ in determining their values. a. Fixed assets b. Perpetuities c. Convertible securities d. Constant growth securities 8. Over the past 7 years the dividends of Sunshine Mining have grown from $0.24 to the current level of $.53. What is the approximate annual compound growth rate of Sunshine's dividends? a. 20.8% b. 12.0% c. 9.5% d. 10.0% 9. What is the rate of return to an investor in the stock of Bajo, Inc. if the current dividend of $0.80 is not expected to change in the foreseeable future? The current price of Bajo is $13.25. a. 6.04% b. 8.0% c. 24.15% d. 10.6% 10. The stock of Music City is selling for $37.50 and pays a current annual dividend of $1.10. What is the implied growth rate of dividends for this firm (assume dividends are expected to grow at a constant rate) if an investor's required rate of return is 14 percent? a. 11.07% b. 14.0% c. 11.4% d. 10.75% 11. Pace Enterprises' common stock sells for $29, and its dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the expected dividend next year? a. $1.33 b. $2.40 c. $1.45 d. $1.60 12. Wilshire Company's earnings and common stock dividends have been growing at an annual rate of 4 percent over the past several years. The firm currently (t = 0) pays an annual dividend of $4.00. Assuming that Wilshire's common stock dividends continue growing at the past rate for the foreseeable future, determine the value of the company's common stock to an investor who requires a 13 percent rate of return on these securities. a. $44.44 b. $36.81 c. $46.22 2 Instructor: d. $54.00 13. Zero-Sum Enterprise expects to pay an annual dividend of $0.48 next year. Dividends and earnings have been growing at a compound annual rate of 8 percent and are expected to continue growing at that rate. What is an investor's required rate of return on Zero-Sum if the current price is $12? a. 12.3% b. 12.0% c. 10.0% d. 10.3% 14. What is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50, and a dividend of $4.10? a. 8.20% b. 11.34% c. 8.82% d. 12.20% 15. Morton Industries' common stock sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If investors in Morton require a 13% rate of return, what is the current dividend? a. $2.70 b. $2.50 c. $4.00 d. $7.02 3

Tutor Answer

daffysteven
School: Rice University

Attached.

Instructor:

Homework

FIN 3343
Name__________________________

Please select the best choice from the answer choices given.
1.

Which of the following is NOT a type of long-term debt?
a. mortgage bonds
b. debentures
c. debenture bonds
d. commercial paper

answer; commercial paper
2.

What is the current price of a bond issued by Dundee International which pays a
semiannual coupon rate of 6 8/9%? The bond matures in 5 years and the required return
on investments of similar risk is 6.5%.

assuming cash
flow and maturity value= 1000
Current price of the bond = Semi Annual Coupon*(1-(1+r)^-n)/r + Face value/(1+r)^n
r = 6.5%*1/2 = 3.25%
n = 5*2 = 10
Current price of the bond = (1000*(6+8/9)%*1/2)*(1-(1+3.25%)^-10)/3.25% +
1000/(1+3.25%)^10
Current price of the bond = 1016.38

3.

Maxine Corp has a 5 1/8% coupon bond outstanding in 2004. The bond matures on April
1 in the maturity year. Suppose an investor bought this bond on April 1, 1999 and
assume that interest is paid annually on April 1. Calculate the yield-to-maturity assuming
the investor buys the bond at 105, as quoted in the financial press.

Solution;
N= 5*2
PV= $105
PMT=51.3/2
FV=1000
Solving for i=4.26*2=8.52%
1

Instructor:

A “junk bond” is a term used to describe a bond that
a. is in default
b. is rated Ba or lower
c. is currently paying interest
d. has been downgraded by Moody’s
answer; describes bond that is normally rated Ba or lower
4.

5.

_____________________________are not secured by specific assets.

Debentures are the only one that are not secured by specific assets

6.

Determine the expected inflation rate if the nominal rate of return is 10% and the real rate
of return is 7%.

Answer;
Expected inflation= nominal rate of return- the real rate of return
10%-7%= 3%
= 3%

7.

You just purchased a bond for 99.35. It matures in 12 years and pays a coupon of 8 3/7%
semiannually. What return can you expect to earn if you hold it until maturity?

Assuming that you hold bond whose par value is $100, then we determine cashflow first
=( (59/7)%* 100)/2= 8.429/2= $4.214
Now we apply this formula $99.35= $4.214*(1-(1/(1+i)^8.4))/i+$100*(1/(1+i)^8.4)
Since the price par value is higher than bond price then this means bond is priced at
discount and the interest will be greater than (59/7)%
(59/7)%= 0.084
So we use % higher than 0.0842 in order to get which corresponds 99.35

2

Instructor:

The interest is 9.04%

8.

The ____ the investor's required rate of return on a bond, the ____ will be the value of the
bond to the investor.

Answer; the lower, the higher

9.

A sinking fund allows the issuer to
a. redeem an entire debt issue prior to maturity
b. purchase a portion of the debt each year in the open market or call
a portion of the debt for mandatory redemption
c. call the entire debt issue
d. accumulate interest expenses into a sinking fund account

Answer; this sinking fund allows the issuer to purchase a portion of the debt each year in the
open market or call a portion of the debt for mandatory redemption
10.

How many years are left until maturity of a bond that is selling for $916.95? The coupon
rate of the bond is 8 percent, interest is payable semiannually, and the current market rate
of return on a similar risk bond is 10 percent.
You can use try and error or calculator where you feed numbers that can be near $916.95
Interest= 10/2 since is semiannually
Pv=916.95
PMT=80/2
FV=1000 assuming
The...

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Anonymous
Outstanding Job!!!!

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