FIN 305 WEEK 4 ACTUAL EXAM PAPER
2026 QUESTIONS WITH ANSWERS
GRADED A+
◍ There is a bond that has a quoted price of 92.187 and a par value of $2,000.
The coupon rate is 6.45 percent and the bond matures in 11 years. If the
bond makes semiannual coupon payments, what is the YTM of the bond?.
Answer: 7.51%
◍ What is the effective annual rate for an APR of 11.80 percent compounded
quarterly?.
Answer: 12.33%
◍ A friend wants to borrow money from you. He states that he will pay you
$4,300 every 6 months for 11 years with the first payment exactly 6 years
and six months from today. The interest rate is an APR of 6.6 percent with
semiannual compounding. What is the value of the payments today?.
Answer: Payment 1: $66,513.79Payment 2: $45,051.35
◍ Assuming an interest rate of 6.2 percent, what is the value of the following
cash flows five years from today?Year Cash Flow 1 $3,515 2 $4,635 3
$5,605 4 $6,880.
Answer: $23,650.98
◍ ABC announced today that it will begin paying annual dividends. The first
dividend will be paid next year in the amount of $.31 a share. The following
dividends will be $.36, $.51, and $.81 a share annually for the following
three years, respectively. After that, dividends are projected to increase by
2.5 percent per year. How much are you willing to pay today to buy one
share of this stock if your desired rate of return is 10 percent?.
Answer: $9.08
, ◍ John, Inc., is considering the purchase of ABC Co. John believes that ABC
Co. can generate cash flows of $4,900, $9,900, and $16,100 over the next
three years, respectively. After that time, they feel the business will be
worthless. John has determined that a rate of return of 10 percent is
applicable to this potential purchase. What is John willing to pay today to
buy ABC Co.?.
Answer: $24,732.53
◍ ABC is expected to pay a dividend of $2.85 next year. The company's
dividend growth rate is expected to be 3.9 percent indefinitely and investors
require a return of 10.1 percent on the company's stock. What is the stock
price?.
Answer: $45.97
◍ The common stock of ABC, Inc., sells for $36.23 a share. The stock is
expected to pay a dividend of $2.20 per share next year. Eddie's has
established a pattern of increasing their dividends by 4.3 percent annually
and expects to continue doing so. What is the market rate of return on this
stock?.
Answer: 10.37%
◍ John just purchased new furniture for his house at a cost of $17,200. The
loan calls for weekly payments for the next 7 years at an annual interest rate
of 11.47 percent. How much are his weekly payments?.
Answer: $68.78
◍ John can afford to pay $365 per month for the next 5 years in order to
purchase a new car. The interest rate is 6.3 percent compounded monthly.
What is the most he can afford to pay for a new car today?.
Answer: $18,744.28
◍ ABC, Inc., has a bond outstanding with a coupon rate of 6.4 percent and
annual payments. The yield to maturity is 7.6 percent and the bond matures
in 20 years. What is the market price if the bond has a par value of $2,000?.
Answer: $1,757.18
2026 QUESTIONS WITH ANSWERS
GRADED A+
◍ There is a bond that has a quoted price of 92.187 and a par value of $2,000.
The coupon rate is 6.45 percent and the bond matures in 11 years. If the
bond makes semiannual coupon payments, what is the YTM of the bond?.
Answer: 7.51%
◍ What is the effective annual rate for an APR of 11.80 percent compounded
quarterly?.
Answer: 12.33%
◍ A friend wants to borrow money from you. He states that he will pay you
$4,300 every 6 months for 11 years with the first payment exactly 6 years
and six months from today. The interest rate is an APR of 6.6 percent with
semiannual compounding. What is the value of the payments today?.
Answer: Payment 1: $66,513.79Payment 2: $45,051.35
◍ Assuming an interest rate of 6.2 percent, what is the value of the following
cash flows five years from today?Year Cash Flow 1 $3,515 2 $4,635 3
$5,605 4 $6,880.
Answer: $23,650.98
◍ ABC announced today that it will begin paying annual dividends. The first
dividend will be paid next year in the amount of $.31 a share. The following
dividends will be $.36, $.51, and $.81 a share annually for the following
three years, respectively. After that, dividends are projected to increase by
2.5 percent per year. How much are you willing to pay today to buy one
share of this stock if your desired rate of return is 10 percent?.
Answer: $9.08
, ◍ John, Inc., is considering the purchase of ABC Co. John believes that ABC
Co. can generate cash flows of $4,900, $9,900, and $16,100 over the next
three years, respectively. After that time, they feel the business will be
worthless. John has determined that a rate of return of 10 percent is
applicable to this potential purchase. What is John willing to pay today to
buy ABC Co.?.
Answer: $24,732.53
◍ ABC is expected to pay a dividend of $2.85 next year. The company's
dividend growth rate is expected to be 3.9 percent indefinitely and investors
require a return of 10.1 percent on the company's stock. What is the stock
price?.
Answer: $45.97
◍ The common stock of ABC, Inc., sells for $36.23 a share. The stock is
expected to pay a dividend of $2.20 per share next year. Eddie's has
established a pattern of increasing their dividends by 4.3 percent annually
and expects to continue doing so. What is the market rate of return on this
stock?.
Answer: 10.37%
◍ John just purchased new furniture for his house at a cost of $17,200. The
loan calls for weekly payments for the next 7 years at an annual interest rate
of 11.47 percent. How much are his weekly payments?.
Answer: $68.78
◍ John can afford to pay $365 per month for the next 5 years in order to
purchase a new car. The interest rate is 6.3 percent compounded monthly.
What is the most he can afford to pay for a new car today?.
Answer: $18,744.28
◍ ABC, Inc., has a bond outstanding with a coupon rate of 6.4 percent and
annual payments. The yield to maturity is 7.6 percent and the bond matures
in 20 years. What is the market price if the bond has a par value of $2,000?.
Answer: $1,757.18
