ASU FIN 300 CORRECT GUIDE QUESTIONS AND
ANSWERS SURE A+
✔✔Generic Inc. issued bonds in 2021 that will mature 16 years from the date of issue.
The bond pays a 14.375 percent coupon and the interest is paid semiannually. Its
current price is $1,508.72. What is the effective annual yield on the bonds? - ✔✔8.68%
✔✔A CEO receives 10,000 shares of restricted stock in their company that vests in 3
years with a per share price of $10 per share. If the CEO is able to make investment
and other decisions that increase the price per share to $30 over the next 3 years, how
much will the CEO gain from the value of their restricted shares? - ✔✔$200,000
✔✔Gunther earned a 62.5 percent return on a stock that he purchased one year ago.
The stock is now worth $12, and he received a dividend of $1 during the year. How
much did Gunther originally pay for the stock? - ✔✔$8.00
✔✔Barbra purchased a piece of real estate last year for $85,000. The real estate is now
worth $102,000. If Barbra needs to have a total return of 25 percent during the year,
then what is the dollar amount of income that she needs to have to reach her objective?
- ✔✔$4,250
✔✔George Wilson purchased Bright Light Industries common stock for $47.50 on
January 31, 2020. The firm paid dividends of $1.10 during the last 12 months. George
sold the stock today (January 30, 2021) for $54.00. What is George's holding period
return? - ✔✔16.00%
✔✔Use the following table to calculate the expected return from the asset
Return 0.1 0.2 0.25
Probability 0.25 0.5 0.25 - ✔✔18.75%
, ✔✔Julio purchased a stock one year ago for $27. The stock is now worth $32, and the
total return to Julio for owning the stock was 37 percent. What is the dollar amount of
dividends that he received for owning the stock during the year? - ✔✔$5
✔✔Genaro needs a return of 40 percent for his one-year investment in a property. He
believes that he can sell the property at the end of the year for $150,000 and that the
property will provide him with rental income of $25,000. What is the maximum amount
that Genaro should be willing to pay for the property? - ✔✔$125,000
✔✔Highland Corp., a U.S. company, has a five-year bond with. face value or $1,000
whose yield to maturity is 6.5 percent. The bond has no coupon payments. What is the
price of this zero coupon bond? (Assume semi-annual compounding for these zero-
coupon bonds.) - ✔✔$726.27
✔✔Which of the following theorems explains the relationship between interest rates and
bond prices?
A) Bond prices are directly related to interest rate movements.
B) For a given change in interest rates, the prices of short-term bonds will change more
drastically than the prices of long-term bonds.
C) For a given change in interest rates, the prices of higher- coupon bonds will change
more drastically then the prices of lower-coupon bonds.
D) For a given change in interest rates, the prices of long-term bonds will change
drastically than the prices of short-term bonds - ✔✔D) For a given change in interest
rates, the prices of long-term bonds will change drastically than the prices of short-term
bonds
✔✔Security Analysts that have evaluated Concordia Corporation, have determined that
there is a 15% chance that the firm will generate earning per share of $2.40; a 60%
probability that the firm will generate earning per share of $3.10; and a 25% probability
that the firm will generate earnings per share of $3.80. What are the expected earnings
per share for Concordia Corporation? - ✔✔$3.17
✔✔The expected return for an asset is 18.75 percent. If the return distribution for the
asset is described in the following table, what is the variance for the asset's returns?
Round intermediate computations and final answer to 6 decimal places
Return 0.10 0.20 0.25
Probability 0.25 0.50 0.25 - ✔✔0.002969
✔✔The expected return for the asset shown in the following table is 18.75 percent. If
the return distribution for the asset is described as below, what is the standard deviation
for the asset's returns? Round intermediate computations to 6 decimal places
ANSWERS SURE A+
✔✔Generic Inc. issued bonds in 2021 that will mature 16 years from the date of issue.
The bond pays a 14.375 percent coupon and the interest is paid semiannually. Its
current price is $1,508.72. What is the effective annual yield on the bonds? - ✔✔8.68%
✔✔A CEO receives 10,000 shares of restricted stock in their company that vests in 3
years with a per share price of $10 per share. If the CEO is able to make investment
and other decisions that increase the price per share to $30 over the next 3 years, how
much will the CEO gain from the value of their restricted shares? - ✔✔$200,000
✔✔Gunther earned a 62.5 percent return on a stock that he purchased one year ago.
The stock is now worth $12, and he received a dividend of $1 during the year. How
much did Gunther originally pay for the stock? - ✔✔$8.00
✔✔Barbra purchased a piece of real estate last year for $85,000. The real estate is now
worth $102,000. If Barbra needs to have a total return of 25 percent during the year,
then what is the dollar amount of income that she needs to have to reach her objective?
- ✔✔$4,250
✔✔George Wilson purchased Bright Light Industries common stock for $47.50 on
January 31, 2020. The firm paid dividends of $1.10 during the last 12 months. George
sold the stock today (January 30, 2021) for $54.00. What is George's holding period
return? - ✔✔16.00%
✔✔Use the following table to calculate the expected return from the asset
Return 0.1 0.2 0.25
Probability 0.25 0.5 0.25 - ✔✔18.75%
, ✔✔Julio purchased a stock one year ago for $27. The stock is now worth $32, and the
total return to Julio for owning the stock was 37 percent. What is the dollar amount of
dividends that he received for owning the stock during the year? - ✔✔$5
✔✔Genaro needs a return of 40 percent for his one-year investment in a property. He
believes that he can sell the property at the end of the year for $150,000 and that the
property will provide him with rental income of $25,000. What is the maximum amount
that Genaro should be willing to pay for the property? - ✔✔$125,000
✔✔Highland Corp., a U.S. company, has a five-year bond with. face value or $1,000
whose yield to maturity is 6.5 percent. The bond has no coupon payments. What is the
price of this zero coupon bond? (Assume semi-annual compounding for these zero-
coupon bonds.) - ✔✔$726.27
✔✔Which of the following theorems explains the relationship between interest rates and
bond prices?
A) Bond prices are directly related to interest rate movements.
B) For a given change in interest rates, the prices of short-term bonds will change more
drastically than the prices of long-term bonds.
C) For a given change in interest rates, the prices of higher- coupon bonds will change
more drastically then the prices of lower-coupon bonds.
D) For a given change in interest rates, the prices of long-term bonds will change
drastically than the prices of short-term bonds - ✔✔D) For a given change in interest
rates, the prices of long-term bonds will change drastically than the prices of short-term
bonds
✔✔Security Analysts that have evaluated Concordia Corporation, have determined that
there is a 15% chance that the firm will generate earning per share of $2.40; a 60%
probability that the firm will generate earning per share of $3.10; and a 25% probability
that the firm will generate earnings per share of $3.80. What are the expected earnings
per share for Concordia Corporation? - ✔✔$3.17
✔✔The expected return for an asset is 18.75 percent. If the return distribution for the
asset is described in the following table, what is the variance for the asset's returns?
Round intermediate computations and final answer to 6 decimal places
Return 0.10 0.20 0.25
Probability 0.25 0.50 0.25 - ✔✔0.002969
✔✔The expected return for the asset shown in the following table is 18.75 percent. If
the return distribution for the asset is described as below, what is the standard deviation
for the asset's returns? Round intermediate computations to 6 decimal places
