Finance 20 MCQs Assignment
QUESTION 1 1. Jim Angel holds a $200,000 portfolio consisting of the next shares: What's the portfolio's beta? Inventory Funding Beta A $50,000 Zero.75 B $50,000 Zero.80 C $50,000 1.00 D $50,000 1.20 Whole $200,000 Zero.956 1.022 Zero.853 1.144 Zero.938 With the intention to precisely assess the capital construction of a agency, it's essential to convert its steadiness sheet figures from historic e-book values to market values. KJM Company's steadiness sheet (e-book values) as of immediately is as follows: The bonds have a 7.7% coupon fee, payable semiannually, and a par worth of $1,000. They mature precisely 10 years from immediately. The yield to maturity is 11%, so the bonds now promote beneath par. What's the present market worth of the agency's debt? Lengthy-term debt (bonds, at par) $23,500,000 Most popular inventory 2,000,000 Widespread inventory ($10 par) 10,000,000 Retained earnings four,000,000 Whole debt and fairness $39,500,000 $17,734,265 $23,394,137 $18,866,239 $16,602,290 $19,054,902 QUESTION three 1. Crockett Company's 5-year bonds yield 6.35%, and 5-year T-bonds yield four.75%. The actual risk-free fee is r* = 2.20%, the default threat premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = Zero.90% versus zero for T-bonds, and the maturity threat premium for all bonds is discovered with the method MRP = (t - 1) Zero.1%, the place t = variety of years to maturity. What inflation premium (IP) is constructed into 5-year bond yields? 2.02% 2.49% 2.43% 2.11% 2.15% Koy Company's 5-year bonds yield 9.00%, and 5-year T-bonds yield 5.15%. The actual risk-free fee is r* = three.Zero%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy's bonds is LP = Zero.75% versus zero for T-bonds, and the maturity threat premium for all bonds is discovered with the method MRP = (t - 1) Zero.1%, the place t = variety of years to maturity. What's the default threat premium (DRP) on Koy's bonds? 2.36% three.10% 2.64% 2.70% three.69% QUESTION 5 1. Kristina Raattama holds a $200,000 portfolio consisting of the next shares. The portfolio's beta is Zero.875. If Kristina replaces Inventory A with one other inventory, E, which has a beta of 1.50, what's going to the portfolio's new beta be? Inventory Funding Beta A $50,000 Zero.50 B 50,000 Zero.80 C 50,000 1.00 D 50,000 1.20 Whole $200,000 1.07 1.13 1.18 1.24 1.30 QUESTION 6 1. Nagel Tools has a beta of Zero.88 and an anticipated dividend development fee of four.00% per yr. The T-bill fee is four.00%, and the T-bond fee is 5.25%. The annual return on the inventory market throughout the previous four years was 10.25%. Buyers anticipate the typical annual future return in the marketplace to be 14.50%. Utilizing the SML, what's the agency's required fee of return? 10.85% 15.53% 13.39% 10.31% 14.86% QUESTION 7 1. Mulherin's inventory has a beta of 1.23, its required return is 11.75%, and the risk-free fee is four.30%. What's the required fee of return in the marketplace? (Trace: First discover the market threat premium.) 10.36% 10.62% 10.88% 11.15% 11.43% QUESTION eight 1. Kay Company's 5-year bonds yield 6.20% and 5-year T-bonds yield four.40%. The actual risk-free fee is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default threat premium for Kay's bonds is DRP = 1.30% versus zero for T-bonds, and the maturity threat premium for all bonds is discovered with the method MRP = (t - 1) Zero.1%, the place t = variety of years to maturity. What's the liquidity premium (LP) on Kay's bonds? Zero.52% Zero.61% Zero.38% Zero.50% Zero.56% 5 factors QUESTION 9 1. Jim Angel holds a $200,000 portfolio consisting of the next shares: What's the portfolio's beta? Inventory Funding Beta A $50,000 Zero.95 B $50,000 Zero.80 C $50,000 1.00 D $50,000 1.20 Whole $200,000 Zero.988 1.215 1.155 1.234 1.225 5 factors QUESTION 10 1. Grossnickle Company issued 20-year, noncallable, eight.1% annual coupon bonds at their par worth of $1,000 one yr in the past. At present, the market rate of interest on these bonds is 5.5%. What's the present worth of the bonds, provided that they now have 19 years to maturity? $1,132.57 $1,223.69 $1,301.80 $1,353.87 $1,314.82 QUESTION 11 1. Nagel Tools has a beta of Zero.88 and an anticipated dividend development fee of four.00% per yr. The T-bill fee is four.00%, and the T-bond fee is 5.25%. The annual return on the inventory market throughout the previous four years was 10.25%. Buyers anticipate the typical annual future return in the marketplace to be 13.25%. Utilizing the SML, what's the agency's required fee of return? 10.20% 13.03% 14.50% 12.29% 11.18% 5 factors QUESTION 12 1. A 25-year, $1,000 par worth bond has an eight.5% annual cost coupon. The bond presently sells for $900. If the yield to maturity stays at its present fee, what's going to the value be 5 years from now? $1,069.75 $698.06 $1,096.95 $906.57 $688.99 5 factors QUESTION 13 1. Kollo Enterprises has a beta of Zero.82, the true risk-free fee is 2.00%, buyers anticipate a three.00% future inflation fee, and the market threat premium is four.70%. What's Kollo's required fee of return? 6.73% 6.64% 9.30% 9.56% eight.85% QUESTION 14 1. Take into account the next data after which calculate the required fee of return for the International Funding Fund, which holds four shares. The market's required fee of return is 9.50%, the risk-free fee is 7.00%, and the Fund's belongings are as follows: Inventory Funding Beta A $200,000 1.50 B $300,000 -Zero.50 C $500,000 1.25 D $1,000,000 Zero.75 eight.91% 10.06% 6.77% eight.64% 10.42% 5 factors QUESTION 15 1. Schnusenberg Company simply paid a dividend of D = $Zero.75 per share, and that dividend is anticipated to develop at a relentless fee of 6.50% per yr sooner or later. The corporate's beta is Zero.85, the required return on the market is 10.50%, and the risk-free fee is four.50%. What's the firm's present inventory worth? $22.16 $26.54 $25.77 $29.37 $27.83 5 factors QUESTION 16 1. Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield four.50%. The actual risk-free fee is r* = 2.5%, the default threat premium for Kelly's bonds is DRP = Zero.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's the maturity threat premium (MRP) on all 5-year bonds? Zero.38% Zero.50% Zero.40% Zero.59% Zero.56% 5 factors QUESTION 17 1. You maintain a diversified $100,000 portfolio consisting of 20 shares with $5,000 invested in every. The portfolio's beta is 1.12. You propose to promote a inventory with b = Zero.90 and use the proceeds to purchase a brand new inventory with b = 1.80. What is going to the portfolio's new beta be? 1.286 1.255 1.224 1.194 1.165 QUESTION 18 1. You maintain a diversified $100,000 portfolio consisting of 20 shares with $5,000 invested in every. The portfolio's beta is 1.12. You propose to promote a inventory with b = Zero.90 and use the proceeds to purchase a brand new inventory with b = 2.50. What is going to the portfolio's new beta be? 1.20 1.152 1.308 Zero.912 1.008 5 factors QUESTION 19 1. The Francis Firm is anticipated to pay a dividend of D = $1.25 per share on the finish of the yr, and that dividend is anticipated to develop at a fixed fee of 6.00% per yr sooner or later. The corporate's beta is 1.45, the market threat premium is 5.50%, and the risk-free fee is four.00%. What's the firm's present inventory worth? $20.92 $22.18 $19.87 $18.20 $21.34 5 factors QUESTION 20 1. Grossnickle Company issued 20-year, noncallable, 6.three% annual coupon bonds at their par worth of $1,000 one yr in the past. At present, the market rate of interest on these bonds is 5.5%. What's the present worth of the bonds, provided that they now have 19 years to maturity? $1,136.58 $950.79 $1,289.58 $1,049.15 $1,Zero92.86