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Question;31. A 15-year bond with a face value of;$1,000 currently sells for $850. Which;of the following statements is CORRECT?;a. The bond?s coupon rate exceeds its current;yield.;b. The bond?s current yield exceeds its yield to maturity.;c. The bond?s yield to maturity is greater;than its coupon rate.;d. The bond?s current yield is equal to its coupon rate.;e. If the yield to maturity stays constant until the bond matures, the bond?s;price will remain at $850.;32. McCue Inc.'s bonds currently sell for;$1,250. They pay a $90 annual coupon;have a 25-year maturity, and a $1,000 par value, but they can be called in 5;years at $1,050. What is the difference;between this bond's YTM and its YTC?;a. 2.62%;b. 2.88%;c. 3.17%;d. 3.48%;e. 3.83%;33. Taussig Corp.'s bonds currently sell;for $1,150. They have a 6.35% annual;coupon rate and a 20-year maturity, but they can be called in 5 years at;$1,067.50. Assume that no costs other;than the call premium would be incurred to call and refund the bonds, and also;assume that the yield curve is horizontal, with rates expected to remain at;current levels on into the future. Under;these conditions, what rate of return should an investor expect to earn if he;or she purchases these bonds?;a. 3.42%;b. 3.60%;c. 3.79%;d. 3.99%;e. 4.20%;34. Limitless Energy, Inc. is considering;to issue 8.8% semi-annual coupon bonds with 15 years to maturity. The bonds are;selling at $965.75 with a par value of $1,000. What rate of return are;investors expected to earn?;a. 4.61%;b. 9.24%;c. 9.05%;d. 8.79%;e. 7.90%;35. Consider a 10 year semi-annual coupon;paying bond with a face value=$1,000 and a coupon rate=8%. What is the PV of;the bond at 8% discount rate? If the market price of the bond is $1,050, would;you buy the bond?;a.;$909.09, Buy;b.;$1010.10, Buy;c.;$909.09, Don?t;d.;$1000, Don?t;e.;$1000.00, Buy;36. A tax-free muni yields 7.5% and the;before-tax equivalent yield of a corporate bond is 10%, what is your tax;bracket?;a.;25%;b.;30%;c.;33%;d.;35%;e.;40%;37. Which one has the lowest priority?;a.;Suppliers;b.;Secured bonds;c.;Junior bonds;d.;Senior debenture;e.;Unsecured bonds;38. You are considering two investment;opportunities with $900. One is to invest in a two year CD at 10% per annum.;The other is to invest in a two year annual coupon paying bond with a coupon;rate=8% and FV=$1,000. What is the YTM of the bond? Are you going to invest in;the CD or not?;a.;12%, Yes;b.;13%, Yes;c.;12%, No;d.;14%, No;e.;14%, Yes;39. Warren holds a small portfolio of 4;stocks as below.;Stock;Percentage of Portfolio;Expected Return;Standard Deviation;Artemis;Inc.;20%;8%;23%;Babish;Co.;30%;14%;27%;Cornell;Industries;35%;12%;30%;Danforth;Motors;15%;3%;32%;What is expected return of the;portfolio?;a.;7.84%;b.;8.11%;c.;9.68%;d.;10.45%;e.;15.68%;40. Bill has below portfolio consists of;two stocks, Blue Ocean, Inc. and Red Ocean Corp. He invested 75% in Blue Ocean;Inc. and the rest in Red Ocean Corp.;Market Condition;Probability;Blue Ocean, Inc.;Red Ocean Corp.;Strong;0.20;38%;53%;Normal;0.35;23%;30%;Weak;0.45;-30%;-38%;Based on the information;calculate expected rate of return of (1) Blue Ocean, Inc., (2) Red Ocean Corp.;and (3) portfolio.;a.;1.80%, 2.78%;1.54%;b.;2.15%, 4.00%;2.61%;c.;3.69%, 4.19%;3.15%;d.;4.19%, 5.16%;3.82%;a.;5.16%, 5.49%;4.42%


Paper#51215 | Written in 18-Jul-2015

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