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Finance Math Problems - Assignment Example

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This work called "Finance Math Problems" describes the test and possible answers concerning finance, a company's request for a loan, sales, problems that can occur. From this work, it is clear about the important aspects of the leading company, successful income, positive consequences. …
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Download file to see previous pages 10. Keys Corporations 5-year bonds yield 6.50%, and 5-year T-bonds yield 4.40%.  The real risk-free rate is r* =  2.5%, the default risk premium for Keys bonds is DRP = 0.40%, the liquidity premium on Keys bonds is LP = 1.7% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on a 5-year bond? (Points: 4)
11. Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago.  Today, the market interest rate on these bonds has dropped to 6%.  What is the new price of the bonds, given that they now have 19 years to maturity? (Points: 4)
12. Moussawi Ltd's outstanding bonds have a $1,000 par value, and they mature in 5 years.  Their yield to maturity is 9%, based on semiannual compounding, and the current market price is $853.61. The bonds have a par value of $1,000. What is the bond's annual coupon interest rate? (Points: 4)
13. Which of the following statements is NOT CORRECT? (Points: 4)
14. Over the past 75 years, we have observed that investments with the highest average annual returns also tend to have the highest standard deviations of their annual returns.  This observation supports the notion that there is a positive correlation between risk and return.  Which of the following lists correctly ranks investments from highest to lowest returns and risk (thus, the highest risk security should be shown first, the lowest risk securities shown last)? (Points: 4)
15. Apex Roofing's stock has a beta of 1.50, its required return is 14.00%, and the risk-free rate is 5.00%.  What is the required rate of return on the stock market?  (Hint:  First find the market risk premium.) (Points: 4)
16. The Connors Company's last dividend was $1.00.  Its dividend growth rate is expected to be constant at 15% for 2 years, after which dividends are expected to grow at a rate of 10% forever.  Connors' required return (rs) is 12%.  What is Connors' current stock price? (Points: 4)
17. Assume that Mary Brown Inc. hired you as a consultant to help it estimate the cost of capital. You have been provided with the following data: D0 = $1.20; P0 = $40.00; and g = 7% (constant). Based on the DCF approach, what is Brown's cost of equity from retained earnings? (Points: 4) ...Download file to see next pagesRead More
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