Week 3_ Test Your Knowledge (TYK)_ PJM 6075 WINTER 2024 PROJECT FINANCE 20736_21621
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Week 3: Test Your Knowledge (TYK): PJM 6075 WINTER 2024 PROJECT FINANCE 20736/21621
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Week 3: Test Your Knowledge (TYK) Due Mar 10 at 5pm
Points 20
Questions 20
Time Limit 60 Minutes
Allowed Attempts 3
Instructions
Attempt History
Attempt
Time
Score
LATEST
Attempt 1
28 minutes
18 out of 20
Score for this attempt: 18 out of 20
This practice test covers week 3 course materials, which include the project ±nance markets, capital structure and cost of
capital. Each answer key contains detailed explanations to help you master the course materials. Take notes as you learn,
because the ±nal exam will cover week 1-week 6 course materials. You can take this practice test up to three times.
Test Parameters
Logistics: Online
Number of Questions: 20
Duration: 60 minutes
Possible points: 20 points
Type of test: Open Book
Questions Type: Fill in the blank, multiple choice, multiple answer, and matching
Question Delivery: One question at a time
Multiple Attempts: You can take this test up to three times
Force Completion: Once started, this Test must be completed in one sitting.
Due date: Sunday of the Third week of the course
Learning Connection:
This Test Your Knowledge (TYK) practice test is directly linked to the following key learning outcomes from the course
syllabus:
Examine the capital structure of a project organization
Use real world case studies to apply project ±nance theories by
Calculating the cost of capital of a project company
Determining the optimal capital structure that maximizes the value of a project company
Analyzing the factors that impact a project company's dividend policy
Take the Quiz Again
3/20/24, 4:32 PM
Week 3: Test Your Knowledge (TYK): PJM 6075 WINTER 2024 PROJECT FINANCE 20736/21621
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Submitted Mar 10 at 7:28pm
This attempt took 28 minutes.
Question 1
1 / 1 pts
$22.61
$46.00
Correct!
$50.00
$53.00 The conversion price is the assumed price of the stock, which was set at the time the bonds were
issued. Dividing the $1 ,000 face value by the 20 shares results in a conversion price of $50. Answer (A)
is incorrect because it is the ratio of stock price to bond price, not the conversion price.
Question 2
1 / 1 pts
Correct!
Usually exhibit greater stability than earnings.
Fluctuate more widely than earnings.
Tend to be a lower percentage of earnings for mature firms.
Are usually changed every year to reflect earnings changes. Dividend policy determines the portion of net income distributed to stockholders. Corporations normally
try to maintain a stable level of dividends, even though profits may fluctuate considerably, because many
stockholders buy stock with the expectation of receiving a certain dividend every year. Thus,
management tends not to raise dividends if the payout cannot be sustained. The desire for stability has
led theorists to propound the information content or signaling hypothesis: a change in dividend policy is a
signal to the market regarding management's forecast of future earnings. This stability often results in a
Chenco's $1 ,000 par value convertible debentures are selling at $1,060 when its stock is selling for
$46.00 per share. What is the conversion price if the conversion ratio is 20?
Project finance experts agree that dividends
3/20/24, 4:32 PM
Week 3: Test Your Knowledge (TYK): PJM 6075 WINTER 2024 PROJECT FINANCE 20736/21621
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stock that sells at a higher market price because stockholders perceive less risk in receiving their
dividends.
Question 3
1 / 1 pts
Sinking fund.
Correct!
Call provision.
Change in rating from Aa to Aaa.
Conversion option. A bond issued at par may carry a lower coupon rate than other similar bonds in the market if it has
features that make it more attractive to investors. For example, a sinking fund reduces default risk.
Hence, investors may require a lower risk premium and be willing to accept a lower coupon rate. Other
features attractive to investors include covenants in the bond indenture that restrict risky undertakings by
the issuer and an option to convert the debt instruments to equity securities. The opportunity to profit
from appreciation of the firm's stock justifies a lower coupon rate. An improvement in a bond's rating from
Aa to Aaa (the highest possible) also justifies reduction in the risk premium and a lower coupon rate.
However, a call provision is usually undesirable to investors. The issuer may take advantage of a decline
in interest rates to recall the bond and stop paying interest before maturity.
Question 4
1 / 1 pts
Commission percentage an investment banker receives for underwriting a security issue.
Discount investment bankers receive on securities they purchase from the issuing company.
Correct!
The bond’s feature that will not reduce the coupon rate on a bond issued at par is a
In project finance capital markets, the concept "underwriting spread" is used to refer to the
3/20/24, 4:32 PM
Week 3: Test Your Knowledge (TYK): PJM 6075 WINTER 2024 PROJECT FINANCE 20736/21621
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Difference between the price the investment banker pays for a new security issue and the price at which the securities
are resold.
Commission a broker receives for either buying or selling a security on behalf of an investor. An investment banker performs an underwriting or insurance function when it purchases an issue of
securities and then resells them. The risk of price fluctuations during the distribution period is borne
entirely by the investment banker. Investment banking is also an efficient vehicle for marketing the
securities because investment bankers are specialists in such activities. The profit earned is the
underwriting spread, or the difference between the purchase and resale prices of the securities
(effectively, the wholesale and retail prices).
Question 5
1 / 1 pts
Income bonds that require interest payments only when earnings permit.
Subordinated debt and rank behind convertible bonds.
Correct!
Bonds secured by the full faith and credit worthiness of the issuing firm.
A form of lease financing similar to equipment trust certificates. Debentures are unsecured bonds. Although no assets are mortgaged as security for the bonds,
debentures are secured by the full faith and credit of the issuing firm. Debentures are a general
obligation of the borrower. Only companies with the best credit ratings can issue debentures because
only the company's credit rating and reputation secure the bonds.
Question 6
1 / 1 pts
Correct!
In project finance, the term debenture refers to
In project finance capital markets, the primary market deals with the provision of new funds for capital
investments through
3/20/24, 4:32 PM
Week 3: Test Your Knowledge (TYK): PJM 6075 WINTER 2024 PROJECT FINANCE 20736/21621
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New issues of bond and stock securities.
Exchanges of existing bond and stock securities.
The sale of forward or future commodities contracts.
New issues of bond and stock securities and exchanges of existing bond and stock securities. The primary market is the market for new stocks and bonds. In this market, wherein investment money
flows directly to the issuer, securities are initially sold by investment bankers who purchase them from
issuers and sell them through an underwriting group. Later transactions occur on securities exchanges
or other markets.
Question 7
1 / 1 pts
All bonds in the issue mature on the same date.
The yield to maturity is the same for all bonds in the issue.
Correct!
Investors can choose the maturity that suits their financial needs.
The coupon rate on these bonds is adjusted to the maturity date. Serial bonds have staggered maturities; that is, they mature over a period (series) of years. Thus,
investors can choose the maturity date that meets their investment needs. For example, an investor who
will have a child starting college in 16 years can choose bonds that mature in 16 years.
Question 8
0 / 1 pts
I and IV.
Some investors like serial bonds because
If a $1 ,000 bond sells for $1,150, which of the following statements are true?
I. The market rate of interest is greater than the coupon rate on the bond.
II. The coupon rate on the bond is greater than the market rate of interest.
Ill. The coupon rate and the market rate are equal.
IV. The bond sells at a premium.
V. The bond sells at a discount.
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Operating income retun on investment
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Calculate the amount of money that will be in cach of the following accounts at the end of the
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со
Compounding Period
(Compounded every
Months)
12
Annual
Deposit
Amount
Interest
Period
Ассount
Deposited
RM 1,000
Rate
(Years)
Jawa Scottish
Mawar Berduri
10 %
10
95,000
12
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120,000
30,000
15,000
12
Lea Rose
8.
3.
Bunga Larangan
Lin Suhaimi
10
6.
12
4
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Stock A
Probability
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Stock B
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0.1
0.4
Return
Probability
Retum
Return
2%
0.25
3%
-5%
0.4
7%
0.5
20%
10%
0.3
10%
0.25
25%
0.3
0.2
15%
0,15
15%
30%
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Quantitative Problem 1: You plan to deposit $2,200 per year for 6 years into a money market account with an annual return of 2%. You plan
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A loan (promissory note) of $8,200 was made. It is to be paid back in 4 years with
interest of 3.65% compounded quarterly.
What would be the appropriate price to pay for the contract 6 months after the
original contract date to yield the buyer 7.85% compounded semi-annually? Round
you final answer to two decimals. Do not round intermediate steps.
Do not include the dollar sign ($) in your answer. For example, $89.36 input as 89.36.
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2
4
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Charlie takes out a loan for $5,000 with an annual simple interest rate of 12%. How much interest will the loan
accumulate in 4 years?
O $1,000
O $1,200
O $2,400
O $4,200
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Installment Loan
How much of the first
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installment loan
18% shown in the table will
Principal
$2000.00
Term Length
2 years
Interest Rate
go towards principal?
Monthly Payment
$100.00
B. $70.00
A. $88.00
D. $30.00
C. $111.00
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A $36,000, 60-day, 5% note, dated May 1, is received from a customer on account. Assume a 360-day year, the maturity value of the note is
a. $36,000
b. $36,300
c. $37,800
d. $300
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- Crop a question SIM ? 11:00 AM A elearning.ju.edu.jo The future value of $200 received today and deposited at 8 percent compounded semi-annually for three years is Select one: a. $352 b. $158 C. $253 d. $380 Previous page Next page Quiz navigation 4. 6. Finish attempt. Go Time left 0:19:14 IIarrow_forward17.39 .. 90 PROBLEMS OF SEMESTER FINAL TEST 2021 Word es Mailings Review View Help O Tell me what you want to do Aa - AaBbCeDd AaBbCcl AaBbCcDe AaBbCcDe AaBt Heading 2 Heading 3 T Normal I No Spac. Headin Paragraph Styles 4.5.6 7 8.. 9. • 10. 11 12. 13. 14. 15.I Thursday : January 21, 2021 --- 80 Minutes 1. In this section we examine three theories of investor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase. 2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are S 657.535 and sales are S 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average $ 657.535. What is the length of the cash conversion sicle? 3. The ELGRAJO Corporation has capital structure as follow…arrow_forwardTopic 4 Homework Close Date: Wed, Sep 29, 2021, 11:59 PM Question 9 of 15 If the margin on an item is 22.00%, calculate the rate of markup of the item. Round to two decimal places if necessary SAVE PROGRESS SUBMITASarrow_forward
- New tab x Content x Quiz 3-MAT-143, section 03F, Fax + https://www.webassign.net/web/Student/Assignment-Responses/last?dep=34832472 a A ✰ DETAILS MY NOTES ASK YOUR TEACHE A newspaper editor starts a retirement savings plan in which $225 per month is deposited at the beginning of each month into an account that earns an annual interest rate of 6.4% compounded monthly. Find the value of this investment (in dollars) after 20 years. (Round your answer to the nearest cent.) $ DETAILS MY NOTES ASK YOUR TEACHI logo design company purchases four new computers for $12,500. The company finances the cost of the computers for 3 years at an annual interest rate of 5.175% compounded monthly. Find the month ayment (in dollars) for this loan. (Round your answer to the nearest cent. See Example 8 in this section.) Submit Assignment Home My Assignments Request Extension Copyright © 1998-2024 Cengage Learning, Inc. All Rights Reserved | TERMS OF USE PRIVACY 12:03 PMarrow_forwardWhat is the answer A thru D?arrow_forwardDashboard / My courses / FINA 415-1-20201 / General / FINAL EXAM- FINA 415- FALL 2020-21 Quiz nav Question 18 Which of the deposits are used by business people in majority? Answer saved 1 Marked out of 2 Select one: 10 11 Flag question O a. None O b. Recurring Deposits 20 19 O c. Savings Deposits Finish atte O d. Current Deposits O e. Time Deposits Clear my choice Next page Previous page Unit 4 (3).pptx Unit 3 (2).pptx Unit 5 (1) (1).pptxarrow_forward
- For you performance task#2 identify what do the underline words refered to Miriam deposite an amount of php89632.37 from abc bank on the 7th birthday of her daughter that pays 1% interest compounded anually she received an amount of php100000 on the 18th birthday of her daughterarrow_forwardStudy Excel Instructio x EXAM 3-BUSI 320 class notes x b Login (bartieby es/155996/assignments/1958552 E Individual Differen... M Corporate Finance U SPAN101: Element... L Canvas Dashboard U Course Registration out # 4 Comp Prob - Ch 12 (D).docx I Downle Case Study # 4 Excel Submission – Capital Budgeting Comprehensive Problem Pinnacle Custom Home Builders purchased a 40 foot articulating boom lift three years ago for $50,000. The equipment has been depreciated under the 5-year MACRS schedule (20%, 32%, 19%, 12%, 12% & 5%). The old equipment can be sold for $33,000. Pinnacle is considering the purchase of a new 60 foot articulating boom lift that would allow the company to complete nearly all of its construction projects without the need for costly rental lifts. The new lift could be purchased for $105,000 and would also fall under the 5-year MACRS depreciation schedule. Assume the old and new equipment would provide the following operating gains (or losses) over the next six years.…arrow_forwardHome Page - JagApp Week 15 - Homework #9 (100 points) i 5 ווח ezto.mheducation.com ← Check my work M Question 5 - Week 15 - Homework #9 (100 points) - Connect Saved +1 (415) 413-1032 O from your iPhone On October 1, 2024, Ogneva Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable. Calculate the amount of interest revenue Ogneva will recognize in 2024 and 2025. 10 points Year Interest Revenue 2024 2025 eBook Print References Mc Graw Hill Aarrow_forward
- General Accounting I 2020-2021 Fall Term Final Exam (page 18 of 25)-Google Chrome a.tr/mod/quiz/attempt.php?attempt=361811&cmid=180187&page=17 MSKÜ-LMS 1807 ŞB: 1 ÖRGÜN General Accounting I İktisadi ve Idari Bilimler Fakültesi İktisa 8 A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $200 is granted on July 18. What amount is received as payment in full on July 247 Tanmadi O a. $3.332 izerinden tlenmiş O b. $3,600 oruyu etle OC $3.528 O d. $3,400 Önceki sayfaarrow_forward9:00 4G A learning5.uum.edu.my Operating income retun on investment QUESTION 2- Time Value of Money Calculate the amount of money that will be in cach of the following accounts at the end of the given deposit period: со Compounding Period (Compounded every Months) 12 Annual Deposit Amount Interest Period Ассount Deposited RM 1,000 Rate (Years) Jawa Scottish Mawar Berduri 10 % 10 95,000 12 The Piranha 8,000 120,000 30,000 15,000 12 Lea Rose 8. 3. Bunga Larangan Lin Suhaimi 10 6. 12 4 3 QUESTION 3- Risk and Return Sintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented? Stock A Probability 0.15 Stock B Stock C Probability 0.1 0.4 Return Probability Retum Return 2% 0.25 3% -5% 0.4 7% 0.5 20% 10% 0.3 10% 0.25 25% 0.3 0.2 15% 0,15 15% 30% Submission due date: 26 NOVEMBER 2020arrow_forwardPowerSchool Leaming : Portal : D A ANet Online 4DC a login.achievementnetwork.org/tutti/learn/assignments/viewAssignment.svc?ciid3FE954372A54D406885C1144055.. A1 Math Algebra II 20-21 Form MT Online Screen Settings 9 of 9 * Full Screen I Sa Main Street Bank has savings accounts that earn 0.8% interest per month. All deposits, interest payments, and account closures are processed on the first day of a month Part A Assume a customer deposits the same amount of money, x, in dollars, each month. Write an expression that can be used to determine how much money would be in a savings account from Main Street Bank after n months. Respond in the space provided. Part B Luciana and Valerie are both opening savings accounts at Main Street Bank and will close their savings accounts at the end of their savings strategy Luciana's savings strategy is to deposit $200 each month for 24 months. Valerie's savings strategy is to deposit $400 each month for 12 months. Whose savings strategy will result in…arrow_forward
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