FIN 302 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026

FIN 302 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 A bond's yield to maturity takes into consideration: - Answers Both the current yield and any price changes What price will be paid for a U.S. Treasury bond with an ask price of 135.4062 if the face value is $100,000? - Answers $135,406.20 A bond has a coupon rate of 8%, pays interest semiannually, sells for $960, and matures in 3 years. What is its yield to maturity? - Answers 9.5% A bond is priced at $1,100, has 10 years remaining until maturity, and has a 10% coupon, paid semiannually. What is the amount of the next interest payment? - Answers $50 You purchased a 6% annual coupon bond at face value and sold it one year later for $1,015.16. What was your rate of return on this investment if the face value at maturity was $1,000? - Answers 7.52% Two years ago bonds were issued at par with 10 years until maturity and a 7% annual coupon. If interest rates for that grade of bond are currently 8.25%, what will be the market price of these bonds? - Answers $928.84 Nominal U.S. Treasury bond yields: - Answers Include an inflation premium What price will be paid for a Eurobond with an ask price of 116.08 if the face value is 30,000 euros? - Answers 34,824 The current yield tends to understate a bond's total return when the bond sells for a discount because: - Answers The bond's price will increase each year Periodic receipts of interest by the bondholder are known as: - Answers Coupon payments If the tax law changes to reduce or eliminate the deductibility of state and local taxes, what is the impact on tax free municipal bonds for high tax rate individuals? - Answers The demand will be higher since state income taxes are not deductible and muni coupons are not taxed? An investor purchased a fixed coupon bond at a time when the bond's yield to maturity was 6.9%. The investor sold the bond prior to maturity and realized a total return of 7.1%. Which of these most likely occurred while the investor owned the bond? - Answers The bond's current yield increased above the bond's coupon rate If you purchase a 5-year, zero-coupon bond for $691.72, how much could it be sold for 3 years later if interest rates have remained stable? - Answers $848.12 What nominal return would an investor need to receive if he desires a real return of 4% and the rate of inflation is 5%? - Answers 9.2% When comparing a highly liquid bond with a comparable but less liquid bond, the highly liquid bond is most apt to have - Answers A lower yield Which one of the following is correct concerning real interest rates? - Answers Real interest rates, if positive, increase purchasing power over time. If a 4-year bond with a 7% coupon and a 10% yield to maturity is currently with $904.90, how much will it be worth 1 year from now if interest rates are constant? - Answers $925.39 What can be expected to happen when stocks having the same expected risk do not have the same expected return? - Answers At least one of the stocks becomes temporarily mispriced. What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%? - Answers $43.75 Under which of the following forms of market efficiency would stock prices ALWAYS reflect fair value? - Answers Strong-form efficiency The value of common stock will likely decrease if: - Answers The discount rate increases If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year and the dividend payout ratio is 40%, what is the stock's current price? - Answers $40.50 For corporate financial managers an important lesson of market efficiency is: - Answers Trust market prices unless you have a clear advantage that ensures the odds are in your favor. The sustainable growth rate represents the ___ rate at which a firm can grow. - Answers Maximum; internal financing? Reinvesting earnings into a firm will not increase the stock price unless? - Answers The return on the new investments exceeds the firm's required return Which statement is correct? - Answers It is much easier to judge whether relative stocks prices are correct than to judge whether their absolute level is correct. The semi-strong form of the efficient market hypothesis states that: - Answers Prices reflect all publicly available information Research indicates that the correlation coefficient between successive days' stock price changes is: - Answers quite close to zero What price would you pay today for a stock if you require a rate of return of 13%, the dividend growth rate is 3.6%, and the firm recently paid an annual dividend of $2.50? - Answers $27.55 If the price of a stock falls on 4 consecutive days of trading, the stock prices: - Answers Can still be following a random walk What should be the current price of a stock if the expected dividend is $5, the stock has a required return of 20%, and a constant dividend growth rate of 6%? - Answers $35.71 When investors are NOT capable of making superior investment decisions on a consistent basis based on past prices or public or private information, the market is said to be: - Answers Strong-form efficient If it proves possible to make abnormal profits based on information regarding past stock prices, then the market is: - Answers Weak-form efficient Which statement is correct? - Answers Bubbles can result when prices rise rapidly and investors join the game on the assumption that prices will continue to rise.