FINC 331 Quiz 3 | UPDATED Questions with 100% Verified Answers
Question:
Nico Corp issued bonds bearing a coupon rate of 12 percent,
pay coupons semiannually, have 3 years remaining to
maturity, and are currently priced at $940 per bond. What is
the yield to maturity?
A. 14.54%
B. 13.99%
C. 15.25%
D. 12.00%
Answer:
A. 14.54% PMT=60 (.12*10000)/2 N=6 (3*2) FV=1000
PV=940
---------- I/Y= 7.2693*2= 14.54
Question:
A firm has issued cumulative preferred stock with a $100 par
value and a 12 percent annual dividend. For the past two
years, the board of directors has decided not to pay a
dividend. At the end of the current year, the preferred
stockholders must be paid ________ prior to paying the
common stockholders.
A. $24/share
B. $12/share
C. $ 0/share
D. $36/share
Answer:
D. $36/share (.12x100)= 12x3=36
Question:
Which of the following typically applies to common stock but
not to preferred stock?
A. par value
, B. voting rights
C. dividend yield
D. legally considered as equity in the firm
Answer:
B. voting rights
Question:
What is the approximate yield to maturity for a $1,000 par
value bond selling for $1,120 that matures in 6 years and pays
12 percent interest annually?
A. 13.2 percent
B. 8.5 percent
C. 12.0 percent
D. 9.3 percent
Answer:
D. 9.3 percent PV= +- 1120 FV=1000 N=6 PMT= 120
------------- I/Y= 9.30
Question:
Nico Nelson, a management trainee at a large New
Yorkminus·based bank, is trying to estimate the real rate of
return expected by investors. He notes that the 3·month T·bill
currently yields 3 percent and has decided to use the
consumer price index as a proxy for expected inflation. What
is the estimated real rate of interest if the CPI is currently 2
percent?
A. 5%
B. 2%
C. 3%
D. 1%
Answer:
D. 1% 3%-2%= 1%
Question:
Nico Corp issued bonds bearing a coupon rate of 12 percent,
pay coupons semiannually, have 3 years remaining to
maturity, and are currently priced at $940 per bond. What is
the yield to maturity?
A. 14.54%
B. 13.99%
C. 15.25%
D. 12.00%
Answer:
A. 14.54% PMT=60 (.12*10000)/2 N=6 (3*2) FV=1000
PV=940
---------- I/Y= 7.2693*2= 14.54
Question:
A firm has issued cumulative preferred stock with a $100 par
value and a 12 percent annual dividend. For the past two
years, the board of directors has decided not to pay a
dividend. At the end of the current year, the preferred
stockholders must be paid ________ prior to paying the
common stockholders.
A. $24/share
B. $12/share
C. $ 0/share
D. $36/share
Answer:
D. $36/share (.12x100)= 12x3=36
Question:
Which of the following typically applies to common stock but
not to preferred stock?
A. par value
, B. voting rights
C. dividend yield
D. legally considered as equity in the firm
Answer:
B. voting rights
Question:
What is the approximate yield to maturity for a $1,000 par
value bond selling for $1,120 that matures in 6 years and pays
12 percent interest annually?
A. 13.2 percent
B. 8.5 percent
C. 12.0 percent
D. 9.3 percent
Answer:
D. 9.3 percent PV= +- 1120 FV=1000 N=6 PMT= 120
------------- I/Y= 9.30
Question:
Nico Nelson, a management trainee at a large New
Yorkminus·based bank, is trying to estimate the real rate of
return expected by investors. He notes that the 3·month T·bill
currently yields 3 percent and has decided to use the
consumer price index as a proxy for expected inflation. What
is the estimated real rate of interest if the CPI is currently 2
percent?
A. 5%
B. 2%
C. 3%
D. 1%
Answer:
D. 1% 3%-2%= 1%
