Financial Management: Valuation of Bonds and Shares Quiz

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Question text What would you pay for a $1,000 face value, zero-coupon bond which matures in 16 years if market interest interest rates are currently 3%? Select one: A. $623.17 B. $889.45 C. $1,000.00 D. $1,131.89 E. $1,300.00 Check

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Question text Which of the bonds described below will have the greatest percentage price change if market interest rates increase from 10% to 11%? Select one: A. Bond D: D: a $1,000 par value, 6% coupon coupon bond, maturing maturing in 20 years years B. Bond B: a $1,000 par v alue, 8% coupon bond, maturing in 20 years C. The percentage price change for all four bonds will be the same. D. Bond C: a $1,000 par value, 6 % coupon bond, maturing in 10 years E. Bond A: a $ 1,000 par value, 8% coupon bond, maturing in 10 years Check

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Question text If a 10% coupon bond which has a par value of $1,000 and matures in 5 years is selling today for $928, what is the yield to m aturity on this bond? Select one: A. 8.33% B. None of the above C. 12.00% D. 16.00% E. 6.00% Check



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Question text A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years and has a yield to maturity of 10%. What is the intrinsic value of this bond if the coupon rate is 12%? Select one: A. $922.77 B. 1,077.22 C. $1,075.80 D. $960.87 E. $924.16

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Question text A coupon bond that pays interest of $100 annually has a par value of $1,000, matures in 5 years and is selling today at discount of $72 from its par value, what is the yield to maturity on this bond? Select one: A. 60.00% B. 6.00% C. 10.39% D. 8.33% E. 12.00% Check

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Question text What is the price of a 7% coupon bond which pays interest on a semi-annual basis with exactly 2.5 years to maturity and a yield to maturity of 8.75%? Select one: A. $961.45 B. $969.11 C. 1096.11

D. $934.38 E. $1085.27 Check

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Question text A 6% coupon bond with a face value of $1000 and 15 years remaining to maturity is currently trading at $836. If coupon payments are made on a semi-annual basis, what is the effective yield to maturity on the bond? Select one: A. 7.37% B. 7.88% C. 3.94% D. 8.04% E. 9.27% Check

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Question text Which of the following bonds would be faced with the highest interest rate risk? Select one: A. Bond E with 20% coupon and 10 year maturity B. Bond D with Zero coupon and 20 year maturity

C. Bond B with 10% coupon and 10 year maturity D. Bond A with 10% coupon and 20 year maturity E. Bond C with 5% coupon and 10 year maturity Check

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Question text The ______ is a measure of the average rate of return an investor will earn if the investor buys a bond today and holds it until maturity. Select one: A. Current Yield B. Price Earnings Ratio C. Dividend Yield D. Discount Yield E. Yield to Maturity Check

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Question text All other things being equal (ceteris paribus), the price and yield on a bond are ___________ Select one: A. Not Related B. Positively Related

C. Partially Related D. Sometimes positively and sometimes negatively E. Negatively related Check

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Question text A coupon bond that pays interest annually is selling at a par value of $1,000, matures in 5 years, and has a coupon rate of 9%. What is the yield to maturity (YTM) on this bond? Select one: A. 8.00% B. 10.00% C. 11.00% D. 4.50% E. 9.00% Check

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Question text Which of the following statements about bonds is true? Select one: A. Bond prices and market interest rates move in the same direction

B. If the YTM is less than the coupon rate, the bond will trade at a discount C. All else being equal, bonds with longer maturities face lower interest rate risk D. All else being equal, bonds with smaller coupons face face lower interest rate risk E. The yield to maturity is the average rate of return on the bond if purchased today and held until maturity Check

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Question text You purchased an annual interest coupon bond one year ago that now has 6 years remaining until maturity. The coupon rate of i nterest was 10% and par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. How much did you pay for this bond one year ago? Select one: A. $1105.63 B. $1092.46 C. $1104.13 D. $1052.42 E. $1075.50 Check

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Question text A and B are two bonds which are presently selling at their par value of $1,000 and both bonds pay interest of $120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 10%, ____________.

Select one: A. both bonds will decrease in value, but Bond A will decrease more than Bond B B. both bonds will increase in value, but Bond B will increase more than Bond A C. None of the above. D. both bonds will increase in value, but Bond A will increase more than Bond B E. both bonds will decrease in value, but Bond B will decrease more than Bond A Check

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Question text A coupon bond has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. What is the intrinsic value of the bond today, if the coupon rate is 7% compounded semi-annually? Select one: A. $712.99 B. $1000.00 C. $1123.01 D. $886.28 E. $844.17 Check

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Each of two shares, C and D, are expected to pay a dividend of $3 in the upcoming year. The expected growth rate of dividends is 9% for both shares.You require a rate of return of 10% on Share C and a return of 13% on Share D. The intrinsic value of Share C _____________ Select one: A. cannot be determined due to insufficient information B. will be the same as the intrinsic value of Share D C. is none of the above D. will be less than the intrinsic value of Share D E. will be greater than the intrinsic value of Share D Check

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Question text A preference share will pay a constant dividend of $2.75 next year and every year thereafter. If an investor's required rate of return on this share is 10%, which of the following is the intrinsic value of this share? Select one: A. $27.50 B. $25.00 C. $56.25 D. $31.82 E. $0.275 Check

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Question text You are considering buying an ordinary share that you would like to hold for one year. If the share is expected to pay a dividend of $1.25 at the end of the year and you can sell the share for $32 at that time, what is the maximum price you would pay for the share today, if your rate of return on the investment was 10%? Select one: A. $27.50 B. $32.50 C. $26.52 D. $30.23 E. $24.11 Check

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Question text If company A will pay a dividend of $3 per share in the next year and if this dividend is expected to grow at 4% per year, what is the implied intrinsic value of the share today given a required rate of return of 7 percent? Select one: A. $90.00 B. $80.00 C. None of the above D. $100.00 E. $110.00 Check

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Question text The Amalgamated Steel Company is expected to pay a dividend of $1.00 one year from today, a dividend of $0.90 at the end of two years and $0.85 at the end of three years. After the third year the dividends are expected to decline at a rate of 2% per year. If the require rate of return for this company's shares is 8%, calculate the intrinsic value of the company's share. Select one: A. $9.66 B. $20.00 C. $8.98 D. None of the above E. $10.70 Check

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Question text A company's $100 par preference share has a dividend rate of 7% and a required rate of return of 11%. The company's earnings are expected to grow at a constant rate of 3% per year. If the market price per share is $75, the preference share is most appropriately described as_______________ Select one: A. Overvalued by $36.36 B. Undervalued by $11.36 C. Overvalued by $11.36 D. Undervalued by $36.36 E. Overvalued by $15.13 Check

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Financial Management: Valuation of Bonds and Shares Quiz

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