FINANCE 301 Actual Exam Questions all with
100% Correct Answers
A $1000 par value bond will mature in 10 years. This bond pays a coupon of $90 every
year. If investors require an annual return of 8%, what is the current price of this bond?
Assume annual payments. - ANSWER $1,067.10
You wish to purchase a 20-year bond that has a maturity value of $1000 and makes
semi-annual interest payments of $40. If you require a 10% yield to maturity on this
investment, what is the maximum price you would pay for the bond? - ANSWER $828.41
A bond with a $1,000 par value pays a coupon of $40 every six months. The bond has 12
years until maturity and a required return of 8%. If the required return suddenly
dropped to 6%, what would be the percentage change in the bond's price? - ANSWER
16.94%
You can purchase a $1000 face value bond with 15 years to maturity for $1124. The
bond pays a semi-annual coupon. The market requires a return of 8% on similar bonds.
What is the coupon rate? - ANSWER 9.43%
Suppose you read in The Wall Street Journal that a bond with face value of $100 has an
annual coupon rate of 9% and a price of $71. What is the bond's current yield? -
ANSWER 12.68%
A zero-coupon bond has 10 years until maturity, $1000 face value, and a current price of
$322. Assuming annual compounding, what is the yield to maturity? - ANSWER 12%
Moe's Inc. has bonds outstanding with a par value of $1000 and 10 years to maturity.
These bonds pay a coupon of $45 every six months. Current market conditions are such
that the bond sells for $938. Calculate the yield to maturity on the issue. - ANSWER 10%
, A newly issued 5-year Altec Corp. bond has a price of $1,095.99, a par value of $1,000,
and pays annual interest at a 12% coupon rate. Find the duration of the bond. - ANSWER
4.083 years
The stock of Merton Inc. currently has a required rate of return of 15% and its dividends
are
growing at the rate of 3% per year. If Merton just paid a dividend of $1 this year, what is
the
current price of a share of Merton stock based on the Dividend Growth Model? -
ANSWER $8.58
Black and Scholes Co. is expected to maintain a constant 4% growth rate in its dividends
indefinitely. If the company has a dividend yield of 6%, what is the required return on
Black and
Scholes' stock? - ANSWER .10
Jarrow Inc. pays a constant $2.00 dividend on its stock. The company will maintain this
dividend for the next 8 years and then cease paying any more dividends forever. If the
required
return on this stock is 10%, what is the current share price? - ANSWER $10.67
Fama Corp.'s current stock price is $36, and its last dividend (D0) was $2.40. The
required
rate of return for Fama Corp. is 12%. If dividends are expected to grow at a constant
rate, g,
what is Fama Corp.'s expected stock price four years from now? - ANSWER $43.76
100% Correct Answers
A $1000 par value bond will mature in 10 years. This bond pays a coupon of $90 every
year. If investors require an annual return of 8%, what is the current price of this bond?
Assume annual payments. - ANSWER $1,067.10
You wish to purchase a 20-year bond that has a maturity value of $1000 and makes
semi-annual interest payments of $40. If you require a 10% yield to maturity on this
investment, what is the maximum price you would pay for the bond? - ANSWER $828.41
A bond with a $1,000 par value pays a coupon of $40 every six months. The bond has 12
years until maturity and a required return of 8%. If the required return suddenly
dropped to 6%, what would be the percentage change in the bond's price? - ANSWER
16.94%
You can purchase a $1000 face value bond with 15 years to maturity for $1124. The
bond pays a semi-annual coupon. The market requires a return of 8% on similar bonds.
What is the coupon rate? - ANSWER 9.43%
Suppose you read in The Wall Street Journal that a bond with face value of $100 has an
annual coupon rate of 9% and a price of $71. What is the bond's current yield? -
ANSWER 12.68%
A zero-coupon bond has 10 years until maturity, $1000 face value, and a current price of
$322. Assuming annual compounding, what is the yield to maturity? - ANSWER 12%
Moe's Inc. has bonds outstanding with a par value of $1000 and 10 years to maturity.
These bonds pay a coupon of $45 every six months. Current market conditions are such
that the bond sells for $938. Calculate the yield to maturity on the issue. - ANSWER 10%
, A newly issued 5-year Altec Corp. bond has a price of $1,095.99, a par value of $1,000,
and pays annual interest at a 12% coupon rate. Find the duration of the bond. - ANSWER
4.083 years
The stock of Merton Inc. currently has a required rate of return of 15% and its dividends
are
growing at the rate of 3% per year. If Merton just paid a dividend of $1 this year, what is
the
current price of a share of Merton stock based on the Dividend Growth Model? -
ANSWER $8.58
Black and Scholes Co. is expected to maintain a constant 4% growth rate in its dividends
indefinitely. If the company has a dividend yield of 6%, what is the required return on
Black and
Scholes' stock? - ANSWER .10
Jarrow Inc. pays a constant $2.00 dividend on its stock. The company will maintain this
dividend for the next 8 years and then cease paying any more dividends forever. If the
required
return on this stock is 10%, what is the current share price? - ANSWER $10.67
Fama Corp.'s current stock price is $36, and its last dividend (D0) was $2.40. The
required
rate of return for Fama Corp. is 12%. If dividends are expected to grow at a constant
rate, g,
what is Fama Corp.'s expected stock price four years from now? - ANSWER $43.76
