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FIN 370 Week 3 Apply: Week 3 Exercise

FIN 370 Week 3 Apply: Week 3 Exercise

Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon Treasury note, and a corporate zero coupon bond maturing in 15 years. (Assume a $1,000 par value.)

Multiple Choice

 

 

 

 
 

 

 

$20.00, $23.75, $150, respectively

 

 

 

 
 

 

 

$4.00, $4.75, $0, respectively

 

 

 

 
 

 

 

$40.00, $47.50, $0, respectively

 

 

 

 
 

 

 

$20.00, $23.75, $0, respectively

 

 

Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.)

Multiple Choice

 

 

 

 
 

 

 

$27.50, $32.25, $100, respectively

 

 

 

 
 

 

 

$27.50, $32.25, $0, respectively

 

 

 

 
 

 

 

$5.50, $6.45, $0, respectively

 

 

 

 
 

 

 

$55.00, $64.50, $0, respectively

 

 

Consider the following three bond quotes; a Treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

Multiple Choice

 

 

 

 
 

 

 

$1,002.30, $994.50, $5,012.25 respectively

 

 

 

 
 

 

 

$1,023.00, $994.50, $5,122.50, respectively

 

 

 

 
 

 

 

$1,002.30, $1,000, $1,000, respectively

 

 

 

 
 

 

 

$1,000, $1,000, $5,000, respectively

 

 

Which of these statements is false?

Multiple Choice

 

 

 

 
 

 

 

The bond market is larger than the stock market.

 

 

 

 
 

 

 

Bonds are always less risky than stocks.

 

 

 

 
 

 

 

Bonds are more important capital sources than stocks for companies and governments.

 

 

 

 
 

 

 

Some bonds offer high potential for rewards and, consequently, higher risk.

 

 

Which of the following issues Treasury Inflation Protected Securities (TIPS)?

Multiple Choice

 

 

 

 
 

 

 

Corporations

 

 

 

 
 

 

 

Municipalities

 

 

 

 
 

 

 

Nonprofits

 

 

 

 
 

 

 

U.S. Treasury

 

 

A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

Multiple Choice

 

 

 

 
 

 

 

$1,138.18, $29.50, respectively

 

 

 

 
 

 

 

$878.60, $16.79, respectively

 

 

 

 
 

 

 

$1,000.00, $29.50, respectively

 

 

 

 
 

 

 

$1,138.18, $16.79, respectively

 

 

A 2.5 percent TIPS has an original reference CPI of 170.4. If the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

Multiple Choice

 

 

 

 
 

 

 

$1,207.16, $15.09, respectively

 

 

 

 
 

 

 

$1,000, $7.16, respectively

 

 

 

 
 

 

 

$1,207.16, $7.16, respectively

 

 

 

 
 

 

 

$1,000, $15.09, respectively

 

 

A 3.25 percent TIPS has an original reference CPI of 194.1. If the current CPI is 210.3, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.)

Multiple Choice

 

 

 

 
 

 

 

$15.00

 

 

 

 
 

 

 

$31.54

 

 

 

 
 

 

 

$17.61

 

 

 

 
 

 

 

$16.25

 

 

A 3.75 percent TIPS has an original reference CPI of 183.9. If the current CPI is 214.7, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.)

Multiple Choice

 

 

 

 
 

 

 

$21.89

 

 

 

 
 

 

 

$43.78

 

 

 

 
 

 

 

$37.50

 

 

 

 
 

 

 

$18.75

 

 

A 3.75 percent TIPS has an original reference CPI of 175.8. If the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

Multiple Choice

 

 

 

 
 

 

 

$1,000, $37.50, respectively

 

 

 

 
 

 

 

$1,181.46, $37.50, respectively

 

 

 

 
 

 

 

$1,000, $18.75, respectively

 

 

 

 
 

 

 

$1,181.46, $22.15, respectively

 

 

Consider the following three bond quotes; a Treasury note quoted at 87.25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

Multiple Choice

 

 

 

 
 

 

 

$1,000, $1,000, $1,000, respectively

 

 

 

 
 

 

 

$872.50, $1,024.20, $5,072.50, respectively

 

 

 

 
 

 

 

$1,000, $1,024.20, $1,001.45, respectively

 

 

 

 
 

 

 

$872.50, $1,000, $1,000, respectively

 

 

 

Which of the following is a true statement?

Multiple Choice

 

 

 

 
 

 

 

If interest rates fall, all bonds will enjoy rising values.

 

 

 

 
 

 

 

If interest rates fall, corporate bonds will have decreasing values.

 

 

 

 
 

 

 

If interest rates fall, no bonds will enjoy rising values.

 

 

 

 
 

 

 

If interest rates fall, U.S. Treasury bonds will have decreasing values.

 

 

 

Which of the following bonds makes no interest payments?

Multiple Choice

 

 

 

 
 

 

 

Zero coupon bond

 

 

 

 
 

 

 

A bond whose coupon rates are greater than market interest rates

 

 

 

 
 

 

 

A bond whose coupon rate is equal to the market interest rates

 

 

 

 
 

 

 

A bond whose coupon rates are less than the market interest rates

 

 

 

If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following statements is true?

Multiple Choice

 

 

 

 
 

 

 

Interest rates required on new bond issue will increase.

 

 

 

 
 

 

 

The current bond price will decrease.

 

 

 

 
 

 

 

The current bond price will increase and interest rates on new bonds issue will decrease.

 

 

 

 
 

 

 

The current bond price will decrease and interest rates on new bonds issue will increase.

 

 

 

Rank from lowest credit risk to highest credit risk the following bonds, with the same time to maturity, by their yield to maturity: Treasury bond with yield of 5.55 percent, IBM bond with yield of 7.95 percent, Trump Casino bond with a yield of 9.15 percent and Banc Ono bond with a yield of 6.12 percent.

Multiple Choice

 

 

 

 
 

 

 

Treasury, Trump Casino, Banc Ono, IBM

 

 

 

 
 

 

 

Treasury, Banc Ono, IBM, Trump Casino

 

 

 

 
 

 

 

Trump Casino, IBM, Banc Ono, Treasury

 

 

 

 
 

 

 

Trump Casino, Banc Ono, IBM, Treasury

 

 

 

Which of the following is an electronic stock market without a physical trading floor?

Multiple Choice

 

 

 

 
 

 

 

Mercantile Exchange

 

 

 

 
 

 

 

Nasdaq Stock Market

 

 

 

 
 

 

 

American Stock Exchange

 

 

 

 
 

 

 

New York Stock Exchange

 

 

 

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called:

Multiple Choice

 

 

 

 
 

 

 

brokers.

 

 

 

 
 

 

 

none of the options.

 

 

 

 
 

 

 

market makers.

 

 

 

 
 

 

 

investors.

 

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to:

Multiple Choice

 

 

 

 
 

 

 

buy using a limit order.

 

 

 

 
 

 

 

buy using a market order.

 

 

 

 
 

 

 

use the bid-ask spread to her advantage.

 

 

 

 
 

 

 

None of the options.

 

 

 

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Multiple Choice

 

 

 

 
 

 

 

Managers

 

 

 

 
 

 

 

Bondholders

 

 

 

 
 

 

 

Stockholders

 

 

 

 
 

 

 

Investment bankers

 

 

 

 

GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN’s market capitalization?

Multiple Choice

 

 

 

 
 

 

 

$89,250,000

 

 

 

\
 

 

 

$89,250,000,000

 

 

 

 
 

 

 

$892,500

 

 

 

 
 

 

 

$892,500,000

 

 

 

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

rev: 07_10_2017_QC_CS-93259

Multiple Choice

 

 

 

 
 

 

 

bondholders

 

 

 

 
 

 

 

common stockholders

 

 

 

 
 

 

 

creditors

 

 

 

 
 

 

 

preferred stockholders

 

 

 

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Multiple Choice

 

 

 

 
 

 

 

+1.69 percent

 

 

 

 
 

 

 

+0.017 percent

 

 

 

 
 

 

 

−1.69 percent

 

 

 

 
 

 

 

−0.017 percent

 

 

 

Dividend yield is defined as:

Multiple Choice

 

 

 

 
 

 

 

the last dividend paid expressed as a percentage of the current stock price.

 

 

 

 
 

 

 

the last four quarters of dividend income expressed as a percentage of the par value of the stock.

 

 

 

 
 

 

 

the last four quarters of dividend income expressed as a percentage of the current stock price.

 

 

 

 
 

 

 

the next dividend to be paid expressed as a percentage of the current stock price.

 

 

 

Why is the ask price higher than the bid price?

Multiple Choice

 

 

 

 
 

 

 

It represents the gain a market maker achieves.

 

 

 

 
 

 

 

It represents the gain the stock seller achieves.

 

 

 

 
 

 

 

It represents the gain all participants will achieve.

 

 

 

 
 

 

 

It represents the gain the stock buy achieves.

 

 

 

JUJU’s dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU’s dividend yield and capital gain?

Multiple Choice

 

 

 

 
 

 

 

9 percent; 3.33 percent

 

 

 

 
 

 

 

3.33 percent; 9 percent

 

 

 

 
 

 

 

6 percent; 1.5 percent

 

 

 

 
 

 

 

1.5 percent; 6 percent

 

 

 

If Target Corp. (TGT) recently earned a profit of $6.07 earnings per share and has a P/E ratio of 16.5. The dividend has been growing at a 10 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 18 in five years?

Multiple Choice

 

 

 

 
 

 

 

$100.16, $109.26 respectively

 

 

 

 
 

 

 

$261.30, $275.96 respectively

 

 

 

 
 

 

 

$161.30, $175.96 respectively

 

 

 

 
 

 

 

$259.78, $283.39 respectively

 

 

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

Multiple Choice

 

 

 

 
 

 

 

$11,958.55

 

 

 

 
 

 

 

$13,789.55

 

 

 

 
 

 

 

$12,174.95

 

 

 

 
 

 

 

$14,037.95

 

 

You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $103.25 and $103.30, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Multiple Choice

 

 

 

 
 

 

 

$10,330.00

 

 

 

 
 

 

 

$20,650.00

 

 

 

 
 

 

 

$20,660.00

 

 

 

 
 

 

 

None of the options

 

 

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price?

Multiple Choice

 

 

 

 
 

 

 

$112.98

 

 

 

 
 

 

 

$185.95

 

 

 

 
 

 

 

$176.25

 

 

 

 
 

 

 

$174.08

 

 

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Multiple Choice

 

 

 

 
 

 

 

$66.87

 

 

 

 
 

 

 

$4.51

 

 

 

 
 

 

 

$22.16

 

 

 

 
 

 

 

$0.22

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