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Finance 20 MCQs Assignment

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Question;QUESTION 11. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio's beta?StockInvestmentBetaA$50,0000.75B$50,0000.80C$50,0001.00D$50,0001.20Total$200,0000.9561.0220.8531.1440.938In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows: The bonds have a 7.7% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm's debt?Long-term debt (bonds, at par)$23,500,000Preferred stock2,000,000Common stock ($10 par)10,000,000Retained earnings4,000,000Total debt and equity$39,500,000$17,734,265$23,394,137$18,866,239$16,602,290$19,054,902QUESTION 31. Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.20%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) 0.1%, where t = number of years to maturity. What inflation premium (IP) is built into 5-year bond yields?2.02%2.49%2.43%2.11%2.15%Koy Corporation's 5-year bonds yield 9.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds?2.36%3.10%2.64%2.70%3.69%QUESTION 51. Kristina Raattama holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875. If Kristina replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?StockInvestmentBetaA$50,0000.50B50,0000.80C50,0001.00D50,0001.20Total$200,0001.071.131.181.241.30QUESTION 61. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.50%. Using the SML, what is the firm's required rate of return?10.85%15.53%13.39%10.31%14.86%QUESTION 71. Mulherin's stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)10.36%10.62%10.88%11.15%11.43%QUESTION 81. Kay Corporation's 5-year bonds yield 6.20% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Kay's bonds is DRP = 1.30% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay's bonds?0.52%0.61%0.38%0.50%0.56%5 pointsQUESTION 91. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio's beta?StockInvestmentBetaA$50,0000.95B$50,0000.80C$50,0001.00D$50,0001.20Total$200,0000.9881.2151.1551.2341.2255 pointsQUESTION 101. Grossnickle Corporation issued 20-year, noncallable, 8.1% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?$1,132.57$1,223.69$1,301.80$1,353.87$1,314.82QUESTION 111. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 13.25%. Using the SML, what is the firm's required rate of return?10.20%13.03%14.50%12.29%11.18%5 pointsQUESTION 121. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?$1,069.75$698.06$1,096.95$906.57$688.995 pointsQUESTION 131. Kollo Enterprises has a beta of 0.82, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Kollo's required rate of return?6.73%6.64%9.30%9.56%8.85%QUESTION 141. Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market's required rate of return is 9.50%, the risk-free rate is 7.00%, and the Fund's assets are as follows:StockInvestmentBetaA$200,0001.50B$300,000-0.50C$500,0001.25D$1,000,0000.758.91%10.06%6.77%8.64%10.42%5 pointsQUESTION 151. Schnusenberg Corporation just paid a dividend of D = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 0.85, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?$22.16$26.54$25.77$29.37$27.835 pointsQUESTION 161. Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.6% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?0.38%0.50%0.40%0.59%0.56%5 pointsQUESTION 171. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio's beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.80. What will the portfolio's new beta be?1.2861.2551.2241.1941.165QUESTION 181. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio's beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 2.50. What will the portfolio's new beta be?1.201.1521.3080.9121.0085 pointsQUESTION 191. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.45, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?$20.92$22.18$19.87$18.20$21.345 pointsQUESTION 201. Grossnickle Corporation issued 20-year, noncallable, 6.3% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?$1,136.58$950.79$1,289.58$1,049.15$1,092.86

 

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