Finance Test Multiple Choice Questions

Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 90 percent of par value, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2

A bond with an annual coupon of $70 and originally sold at par for $1,000. The current market interest rate (yield to maturity) is 8%. This bond will sell at _______. Assuming no change in market interest rates, the bond will present the holder with capital ________ as it matures.

Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan? Express your answer with annual compounding.

Its coupon rate is 8.3%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 5.3%. The modified duration of this bond is ______ years.

Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012.

If the present is Year 0 and rates compound annually, in what year does the first outlay of $45,000 occur? Hint, you’re using the perpetuity approach to valuation.

A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years, how much money will be in the savings account? (Bluman, A. G. 2005, page 230).

2. An 8 percent semiannual coupon bond is priced at $1,204.60. The bond has a

12. If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

The company should set the coupon rate on its new bonds equal to the required returns. And the rate to be is 6.90

Abacus Corp. will pay dividends of $2.25, $2.95 and $3.15 for the next three years. After three years, the firm will grow at a constant rate of 4 percent. If the required rate of return is 14.5 percent, what is the current value of the stock?

- The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.30 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 93 percent of its face value. What is the company's pre-tax cost of debt?

b. Generate a graph or table showing how the bond’s present value changes for semi-annually compounded interest rates between 1% and 15%.

Through this method, we obtained theoretical yields of the 4.25% coupon bond and 10.625% coupon bond to be 2.899% and 2.639% respectively. The corresponding theoretical prices of the bonds are $108.27 for the 4.25% coupon bond and $149.31 for the 10.625% coupon bond (see Table 1 above).

We then get the annuity of the 1,200 semiannual PMTs at year 6, and then at Present Value