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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

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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