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Question 1 What is the net present value of a project with the following cash flows if the discount rate is 14 percent? $742.50 $801.68 $823.92 $899.46 $901.15 Question 2 The 7 percent annual coupon bonds of TPO, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in 6.5 years. What is the yield to maturity? 6.42 percent 6.59 percent 6.63 percent 6.68 percent 6.70 percent Question 3 Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all future dividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return? $12.56 $12.95 $13.31 $13.68 $14.07 Question 4 Winter Wear, Inc. has 6 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $993 each. What is the firm’s pre-tax cost of debt? 5.97 percent 6.08 percent 6.14 percent 6.31 percent 8.33 percent Question 5 The written agreement that contains the specific details related to a bond issue is called the bond: indenture. debenture. document. registration statement. issue paper. Question 6 The Pancake House pays a constant annual dividend of $1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return? $7.86 $8.33 $10.87 $11.04 $11.38 Question 7 Which one of the following types of securities has no priority in a bankruptcy proceeding? Convertible bond Senior debt Common stock Preferred stock Straight bond Question 8 A bond has a $1,000 face value, a market price of $1,036, and pays interest payments of $70 every year. What is the coupon rate? 6.76 percent 7.00 percent 7.12 percent 13.51 percent 14.00 percent Question 9 Which one of the following terms applies to a bond that initially sells at a deep discount and pays no interest payments? Callable Income Zero coupon Convertible Tax-free Question 10 A call provision grants the bond issuer the: right to contact each bondholder to determine if he or she would like to extend the term of his or her bonds. option to exchange the bonds for equity securities. right to automatically extend the bond’s maturity date. right to repurchase the bonds on the open market prior to maturity. option of repurchasing the bonds prior to maturity at a pre-specified price. Which one of the following terms refers to a bond’s rate of return that is required by the market place? Coupon rate Yield to maturity Dirty yield Call yield Discount rate Question 12 A corporate bond pays 8.5 percent interest. You are in the 15 percent tax bracket. What is your after-tax yield on this bond? 1.28 percent 2.23 percent 7.23 percent 8.35 percent 9.78 percent

Question 1

What is the net present value of a project with the following cash flows if the discount rate is 14 percent?


$742.50

$801.68

$823.92

$899.46

$901.15

Question 2

The 7 percent annual coupon bonds of TPO, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in 6.5 years. What is the yield to maturity?

6.42 percent

6.59 percent

6.63 percent

6.68 percent

6.70 percent

Question 3

Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all future dividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return?

$12.56

$12.95

$13.31

$13.68

$14.07

Question 4

Winter Wear, Inc. has 6 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $993 each. What is the firm's pre-tax cost of debt?

5.97 percent

6.08 percent

6.14 percent

6.31 percent

8.33 percent

Question 5

The written agreement that contains the specific details related to a bond issue is called the bond:

indenture.

debenture.

document.

registration statement.

issue paper.

Question 6

The Pancake House pays a constant annual dividend of $1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return?

$7.86

$8.33

$10.87

$11.04

$11.38

Question 7

Which one of the following types of securities has no priority in a bankruptcy proceeding?

Convertible bond

Senior debt

Common stock

Preferred stock

Straight bond

Question 8

A bond has a $1,000 face value, a market price of $1,036, and pays interest payments of $70 every year. What is the coupon rate?

6.76 percent

7.00 percent

7.12 percent

13.51 percent

14.00 percent

Question 9

Which one of the following terms applies to a bond that initially sells at a deep discount and pays no interest payments?

Callable

Income

Zero coupon

Convertible

Tax-free

Question 10

A call provision grants the bond issuer the:

right to contact each bondholder to determine if he or she would like to extend the term of his or her bonds.

option to exchange the bonds for equity securities.

right to automatically extend the bond's maturity date.

right to repurchase the bonds on the open market prior to maturity.

option of repurchasing the bonds prior to maturity at a pre-specified price.



Which one of the following terms refers to a bond's rate of return that is required by the market place?

Coupon rate

Yield to maturity

Dirty yield

Call yield

Discount rate

Question 12

A corporate bond pays 8.5 percent interest. You are in the 15 percent tax bracket. What is your after-tax yield on this bond?

1.28 percent

2.23 percent

7.23 percent

8.35 percent

9.78 percent

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