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5. (TCO 3) Bonds issued by Blue Sky Airlines have...

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5. (TCO 3) Bonds issued by Blue Sky Airlines have a face value of $1,000 and currently sell for $850. The annual coupon payments are $80. If the bonds have 10 years until maturity, what is the approximate YTM of the bonds? (Points: 3) 10.50% 11.50% 11.75% 12% 6. (TCO 3) Bean Coffee issued preferred stock many years ago. It carries a dividend of $8 per share, fixed. As time has passed, yields have decreased from the original eight percent (at the time of issuance) to six percent. What was the current price of the stock? Hint: Yield is the same as required rate of return. (Points: 3) $100 $133 $102 $86.40 None of the above 7. (TCO 3) Intelligence Research, Inc. will pay a common stock dividend of $1.60 at the end of the year. The required rate of return by common stockholders is 13 percent. The firm has a constant growth rate of 7.5 percent. What is the current price of the stock? (Points: 3) $23 $32 $27 $29 8. (TCO 3) Royal Electric paid a $4 dividend last year. The dividend is expected to grow at a constant rate of six percent over the next four years. Common stockholders require a 13 percent return. What are the values of the dividends for years 1, 2 and 3, respectively? (Points: 3) $4, $4.5 and $4.8 $4.24, $4.76 and $5.05 $4.24, $4.49, $4.76 $4, $4.50, $5.05 9. (TCO 6) Which of the following is true regarding the primary market? (Points: 3) it is the market where the largest number of shares are traded on a daily basis. it is the market in which the largest number of issues are listed. it is the market with the largest number of participants. it is the market where new securities are offered. it is the market where shareholders trade most frequently with each other. 10. (TCO 6) The smallest firms listed on NASDAQ are in the NASDAQ _____ Market. (Points: 3) National Capital Regional Global Select Global 11. (TCO 6) The yield to maturity on a bond is: (Points: 3) equal to the coupon rate divided by the current market price. another name for the current yield. equal to the annual interest divided by the face value. the current required market rate. another name for the coupon rate. 12. (TCO 6) A call provision in a bond agreement grants the issuer the right to: (Points: 3) repurchase the bonds prior to maturity at a pre-specified price. replace the bonds with equity securities. repurchase the bonds, after maturity at a pre-specified price. change the coupon rate, provided the bondholders are notified in advance. buy back the bonds on the open market prior to maturity. 13. (TCO 8) Which of the following is true regarding bonds? (Points: 3) Most bonds do not carry default risk. Municipal bonds are free of default risk. Bonds are not sensitive to changes in the interest rates. Moody?s and Standard and Poor?s provide information regarding a bond?s interest rate risk. None of the above is true 14. (TCO 6) Which of the following best describes a floating-rate bond? (Points: 3) A bond that adjusts the coupon payments based on an interest rate index, such as the T-bill. A bond that is issued by the U.S. government. A bond that adjusts the coupon payment date. A bond that has no coupons, but adjusts the face value payment based on inflation. 15. (TCO 6) Which of the following is true regarding convertible bonds? Select all that apply: (Points: 3) Are relatively common Can be exchanged for a fixed number of shares at maturity only Can be exchanged for a fixed number of shares before maturity Allow the holder to require the issuer to buy the bond back

 

Paper#8576 | Written in 18-Jul-2015

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