Bond and Market Capitalization Rate

1. An American put advantage gives its holder the appropriate to _________. A. buy the basal asset at the exercise amount on or afore the cessation date B. buy the basal asset at the exercise amount alone at the cessation date C. advertise the basal asset at the exercise amount on or afore the cessation date D. advertise the basal asset at the exercise amount alone at the cessation date 2. An American alarm advantage gives the client the appropriate to _________. A. buy the basal asset at the exercise amount on or afore the cessation date B. buy the basal asset at the exercise amount alone at the cessation date C. ell the basal asset at the exercise amount on or afore the cessation date D. advertise the basal asset at the exercise amount alone at the cessation date 3. A European alarm advantage gives the client the appropriate to _________. A. buy the basal asset at the exercise amount on or afore the cessation date B. buy the basal asset at the exercise amount alone at the cessation date C. advertise the basal asset at the exercise amount on or afore the cessation date D. advertise the basal asset at the exercise amount alone at the cessation date   4. You acquirement one IBM July 120 alarm arrangement for a exceptional of $5. You authority the advantage until the cessation date aback IBM banal sells for $123 per share. You will apprehend a ______ on the investment. A. $200 profit B. $200 loss C. $300 profit D. $300 loss 5. At arrangement maturity, the amount of a alarm advantage is ___________ area X equals the option's bang amount and ST is the banal amount at arrangement expiration. A. Max(0, ST - X) B. Min(0, ST - X) C. Max(0, X - ST) D. Min(0, X - ST)   1 1. C 2. A 3. B 4. B 5.   A Continued Alarm Profit = Max[0,($123 - $120)(100)] - $500 = -$200   A close that has an ROE of 12% is because acid its allotment payout. The stockholders of the close admiration a allotment crop of 4% and a basic accretion crop of 9%. Accustomed this advice which of the afterward statement(s) is/are correct? I. All abroad according the firm's advance amount will advance afterwards the payout change II. All abroad according the firm's banal amount will go up afterwards the payout change III. All abroad according the firm's P/E arrangement will access afterwards the payout change A. I only. I and II only. II and III only. I, II, and III. 1. A close cuts its allotment payout ratio. As a result, you apperceive that the firm's _______. A. acknowledgment on assets will increase B. balance assimilation arrangement will increase C. balance advance amount will fall. D. banal amount will fall 2. An underpriced banal provides an accepted acknowledgment which is ____________ the appropriate acknowledgment based on the basic asset appraisement archetypal (CAPM). A. beneath than B. according to C. greater than D. greater than or equal          3. Stockholders of Dog's R Us Pet Supply apprehend a 12% amount of acknowledgment on their stock. Management has consistently been breeding an ROE of 15% over the aftermost 5 years but now believes that ROE will be 12% for the abutting bristles years. Accustomed this, the firm's optimal allotment payout arrangement is now ______. A. 0% B. 100% C. amid 0% and 50% D. amid 50% and 100%         4. The connected advance allotment abatement archetypal (DDM) can be acclimated alone aback the ___________. A. advance amount is beneath than or according to the appropriate return. B. advance amount is greater than or according to the appropriate return C. advance amount is beneath than the appropriate return. D. advance amount is greater than the appropriate return.         5. Suppose that in 2009 the accepted assets of the stocks in a ample bazaar base equaled $240 actor aback the abatement amount was 8% and the accepted advance amount of the assets equaled 6%. Application the connected advance blueprint for valuation, if absorption ante access to 9% the amount of the bazaar will change by _____. A. -10% B. -20% C. -25% D. -33%        6. You are because accepting a accepted allotment of Sahali Shopping Center Corporation that you would like to authority for one year. You apprehend to accept both $1. 25 in assets and $35 from the auction of the allotment at the end of the year. The best amount you would pay for a allotment today is __________ if you basic to acquire a 12% return. A. $31. 25. B. $32. 37 C. $38. 47 D. $41. 32        7. Eagle Brand Arrowheads has accepted balance of $1. 5 per allotment and a bazaar assets amount of 12%. Balance are accepted to abound at 5% per year indefinitely. The close has a 40% break aback ratio. By how abundant does the firm's ROE beat the bazaar assets rate? A. 0. 5% B. 1. 0% C. 1. 5% D. 2. 0%        8. A adopted allotment of Coquihalla Corporation will pay a allotment of $8. 00 in the accessible year, and every year thereafter, i. e. , assets are not accepted to grow. You crave a acknowledgment of 7% on this stock. Application the connected advance DDM to account the built-in value, a adopted allotment of Coquihalla Corporation is account _________. A. $13. 50 B. $45. 50 C. $91. 0 D. $114. 29 10. 9. Brevik Builders has an accepted ROE of 25%. Its allotment advance amount will be __________ if it follows a action of advantageous 30% of earning in the anatomy of dividends. A. 5. 0% B. 15. 0% C. 17. 5% D. 45. 0%        10. Cache Creek Manufacturing Aggregation is accepted to pay a allotment of $3. 36 in the accessible year. Assets are accepted to abound at 8% per year. The riskfree amount of acknowledgment is 4% and the accepted acknowledgment on the bazaar portfolio is 14%. Investors use the CAPM to compute the bazaar assets rate, and the connected advance DDM to actuate the amount of the stock. The stock's accepted amount is $84. 0. Application the connected advance DDM, the bazaar assets amount is _________. A. 9% B. 12% C. 14% D. 18%           11. Ace Ventura, Inc. has accepted balance of $5 per allotment for abutting year. The firm's ROE is 15% and its balance assimilation arrangement is 40%. If the firm's bazaar assets amount is 10%, what is the present amount of its advance opportunities? A. $25 B. $50 C. $75 D. $100         12. Flanders, Inc. has accepted balance of $4 per allotment for abutting year. The firm's ROE is 8% and its balance assimilation arrangement is 40%. If the firm's bazaar assets amount is 15%, what is the present amount of its advance opportunities? A. -$6. 33 B. $0 C. $20. 34 D. $26. 67 14.         13. Cache Creek Manufacturing Aggregation is accepted to pay a allotment of $4. 20 in the accessible year. Assets are accepted to abound at a amount of 8% per year. The riskfree amount of acknowledgment is 4% and the accepted acknowledgment on the bazaar portfolio is 14%. Investors use the CAPM to compute the bazaar assets amount on the stock, and the connected advance DDM to actuate the built-in amount of the stock. The banal is trading in the bazaar today at $84. 00.  Application the connected advance DDM and the CAPM, the beta of the banal is _________. A. 1. 4 B. 0. 9 C. 0. 8 D. 0. 5. 14. Westsyde Tool Aggregation is accepted to pay a allotment of $2. 00 in the accessible year. The certain amount of acknowledgment is 6% and the accepted acknowledgment on the bazaar portfolio is 12%. Analysts apprehend the amount of Westsyde Tool Aggregation shares to be $29 a year from now. The beta of Westsyde Tool Company's banal is 1.   Using a one-period appraisal model, the built-in amount of Westsyde Tool Aggregation banal today is _________. A. $24. 29 B. $27. 39 C. $31. 13 D. $34. 52          15. Todd Mountain Development Corporation is accepted to pay a allotment of $2. 50 in the accessible year. Assets are accepted to abound at a amount of 8% per year. The certain amount of acknowledgment is 5% and the accepted acknowledgment on the bazaar portfolio is 12%. The banal of Todd Mountain Development Corporation has a beta of 0. 75. Application the CAPM, the acknowledgment you should crave on the banal is _________. A. 7. 25% B. 10. 25% C. 14. 75% D. 21. 00%          16. Interior Airline is accepted to pay a allotment of $3 in the accessible year. Assets are accepted to abound at a amount of 10% per year. The certain amount of acknowledgment is 4% and the accepted acknowledgment on the bazaar portfolio is 13%. The banal of Interior Airline has a beta of 4. 00. Application the connected advance DDM, the built-in amount of the banal is _________. A. $10. 00 B. $22. 73 C. $27. 78 D. $41. 67           17. Everything equal, which capricious is abnormally accompanying to the built-in amount of a company? A. D1 B. D0 C. g D. k 19.          18. A accepted banal pays an anniversary allotment per allotment of $1. 80. The certain amount is 5 percent and the accident exceptional for this banal is 4 percent. If the anniversary allotment is accepted to abide at $1. 80 per share, what is the amount of the stock? A. $17. 78 B. $20. 00 C. $40. 00 D. None of the above           19. Banal is priced at $45 per share. The banal has balance per allotment of $3. 00 and a bazaar assets amount of 14%. What is the stock's PVGO? A. $23. 57 B. $15. 00 C. $19. 78 D. $21. 34          20. If a close has a chargeless banknote breeze according to $50 actor and that banknote breeze is accepted to abound at 3% forever, what is the absolute close amount accustomed a WACC of 9. 5%? A. $679 million B. $715 million C. $769 million D. $803 million          21. Abutting year's balance are estimated to be $5. 00. The aggregation affairs to reinvest 20% of its balance at 15%. If the amount of disinterestedness is 9%, what is the present amount of advance opportunities? A. $9. 09 B. $10. 10 C. $11. 11 D. $12. 21 1. A2. B3. C4. B5. C6. D7. B8. A9. D10. C11. B12. A13. A14. B15. B16. B17. A18. D19. B20. A21.              1. Consider two bonds, A and B. Both bonds anon are affairs at their par amount of $1,000. Each pay absorption of $120 annually. Band A will complete in 5 years while band B will complete in 6 years. If the yields to ability on the two bonds change from 12% to 14%, _________. A. both bonds will access in amount but band A will access added than band B B. both bonds will access in amount but band B will access added than band A C. both bonds will abatement in amount but band A will abatement added than band B D. both bonds will abatement in amount but band B will abatement added than band A 2.          2. Everything abroad equals the __________ the ability of a band and the __________ the advertisement the greater the acuteness of the bond's amount to absorption amount changes. A. longer; higher B. longer; lower C. shorter; higher D. shorter; lower         3. A __________ band is a band area the issuer has an advantage to retire the band afore ability at a specific amount afterwards a specific date. A. callable B. coupon C. puttable D. treasury 4. In an era of decidedly low-interest rates, which of the afterward bonds is best acceptable to be called? A. Zero-coupon bonds B. Advertisement bonds affairs at a discount C. Advertisement bonds affairs at a premium D. Floating amount bonds          5. A advertisement band that pays absorption of 4% annually, has a par amount of $1,000, matures in 5 years, and is affairs today at $785. The absolute crop to ability on this band is _________. A. 7. 2% B. 8. 8% C. 9. 1% D. 9. 6% 6. A advertisement band that pays absorption of $60 annually, has a par amount of $1,000, matures in 5 years, and is affairs today at $75. 25 abatement from par value. The accepted crop on this band is _________. A. 6. 00% B. 6. 49% C. 6. 73% D. 7. 00% 7. A advertisement band that pays absorption semi-annually has a par amount of $1,000, matures in 8 years, and has a crop to ability of 6%. If the advertisement amount is 7%, the built-in amount of the band today will be __________ (to the abutting dollar). A. $1,000 B. $1,063 C. $1,081 D. $1,100 8. A treasury band due in one year has a crop of 6. 3% while a treasury band due in 5 years has a crop of 8. 8%. A band due in 5 years issued by Aerial Country Marketing Corporation has a crop of 9. 6% while a band due in one year issued by Aerial Country Marketing Corporation has a crop of 6. 8%. The absence accident premiums on the one-year and 5-year bonds issued by Aerial Country Marketing Corp. are appropriately __________ and _________. A. 0. 4%, 0. 3% B. 0. 4%, 0. % C. 0. 5%, 0. 5% D. 0. 5%, 0. 8% 9. A zero-coupon band has a crop to ability of 5% and a par amount of $1,000. If the band matures in 16 years, it should advertise for a amount of __________ today. A. $458. 00 B. $641. 00 C. $789. 00 D. $1,100. 00 10. You can be abiding that a band will advertise at a exceptional to par aback _________. A. its advertisement amount is greater than its crop to maturity B. its advertisement amount is beneath than its crop to maturity C. its advertisement amount according to its crop to maturity D. its advertisement amount is beneath than its about-face value 11. Consider a 7-year band with a 9% advertisement and a crop to ability of 12%. If absorption ante abide constant, one year from now the amount of this band will be _________. A. higher B. lower C. the same D. indeterminate 12. The crop to ability on a band is ________. I. aloft the advertisement amount aback the band sells at a discount, and beneath the advertisement amount aback the band sells at a premium II. the abatement amount that will set the present amount of the payments according to the band price III. according to the accurate admixture acknowledgment on advance alone if all absorption payments accustomed are reinvested at the crop to maturity A. I only B. II only C. I and II only D. I, II, and III 13.         13. Assuming semiannual compounding, a 20-year zero-coupon band with a par amount of $1,000 and a appropriate acknowledgment of 12% would be priced at _________. A. $97 B. $104 C. $364 D. $732 14.          14. The crop to ability of a 10-year zero-coupon bond, with a par amount of $1,000 and a bazaar amount of $625, is _____. A. 4. 8% B. 6. 1% C. 7. 7% D. 10. 4% 15.         15. If the adduce for a Treasury band is listed in the bi-weekly as 98:09 bid, 98:13 ask, the absolute amount for you to acquirement this band accustomed a $10,000 par amount is _____________. A. $9,828. 12 B. $9,809. 38 C. $9,840. 62 D. $9,813. 42 16.         16. The amount on a treasury band is 104:21 with a crop to ability of 3. 5%. The amount on a commensurable ability accumulated band is 103:11 with a crop to ability of 4. 59%. What is the almost allotment amount of the acclaim accident of the accumulated bond? A. 1. 14% B. 3. 45% C. 4. 59% D. 8. 04% 17.              17. You buy an 8 year $1000 par amount band today that has a 6% crop and a 6% anniversary acquittal coupon. In one year promised yields accept risen to 7%. Your one-year captivation aeon acknowledgment was ___. A. 0. 61% B. -5. 39% C. 1. 28% D. -3. 25% 18. If the advertisement amount on a band is 4. 50% and the band is affairs at a premium, which of the afterward is the best acceptable crop to ability on the bond? A. 4. 30% B. 4. 50% C. 5. 20% D. 5. 50% 19.              19. All alternative things equal, which of the afterward has the longest duration? A. A 30 year band with a 10% coupon B. A 20 year band with a 9% coupon C. A 20 year band with a 7% coupon D. A 10 year aught advertisement bond             20. All alternative things equal, which of the afterward has the beeline duration? A. A 30 year band with a 10% coupon B. A 20 year band with a 9% coupon C. A 20 year band with a 7% coupon D. A 10 year aught advertisement bond             21. (Challenge question) A alimony armamentarium charge pay out $1 actor abutting year, $2 actor the afterward year, and again $3 actor the year afterwards that. If the abatement amount is 8% what is the continuance of this set of payments? A. 2. 00 years B. 2. 15 years C. 2. 29 years D. 2. 53 years           22. All alternative things equal, which of the afterward has the longest duration? A. A 20 year band with a 10% advertisement acquiescent 10% B. A 20 year band with a 10% advertisement acquiescent 11% C. A 20 year aught advertisement band acquiescent 10% D. A 20 year aught advertisement band acquiescent 11%           23. Because of convexity, aback absorption ante change the absolute band amount will ____________ the band amount predicted by duration. A. consistently be college than B. sometimes be college than C. consistently be lower than D. sometimes be lower than            24. Continuance is a abstraction that is advantageous in assessing a bond's _________. A. acclaim risk B. clamminess risk C. amount volatility D. appendage accident 25. 25. A alimony armamentarium has an boilerplate continuance of its liabilities according to 15 years. The armamentarium is attractive at 5-year ability zero-coupon bonds and 4% crop perpetuities to immunize its absorption amount risk. How abundant of its portfolio should it admeasure to the zero-coupon bonds to immunize if there are no alternative assets allotment the plan? A. 52% B. 48% C. 33% D. 25%            26. You own a band that has a continuance of 6 years. Absorption ante are currently 7% but you accept the Fed is about to access absorption ante by 25 base points. Your predicted amount change on this band is ________. A. +1. 40% B. -1. 40% C. -2. 51% D. +2. 51%          27. A coffer has an boilerplate continuance of its liabilities according to 2 years. The bank's boilerplate continuance of its assets is 3. 5 years. The bank's bazaar amount of disinterestedness is at accident if _______________________. A. absorption ante fall B. acclaim spreads fall C. absorption ante rise D. the amount of all anchored assets balance rises            28. Banks and alternative banking institutions can best administer absorption amount accident by _____________. A. maximizing the continuance of assets and aspersing the continuance of liabilities B. aspersing the continuance of assets and maximizing the continuance of liabilities C. analogous the durations of their assets and liabilities D. analogous the maturities of their assets and liabilities             29. The continuance of a portfolio of bonds can be affected as _______________. A. the advertisement abounding boilerplate of the continuance of the alone bonds in the portfolio B. the crop abounding boilerplate of the continuance of the alone bonds in the portfolio C. the value-weighted an boilerplate of the continuance of the alone bonds in the portfolio D. boilerplate of the continuance of the longest and beeline continuance bonds in the portfolio           30. Rank the absorption acuteness of the afterward from best acute to an absorption amount change to the atomic sensitive. I. 8% coupon, noncallable 20-year maturity, par bond II. 9% coupon, currently callable 20-year maturity, exceptional bond III. Zero-coupon, 30-year ability bond A. I, II, III B. II, III, I C. III, I, II D. III, II, I           31. A coffer has $50 actor in assets, $47 actor in liabilities, and $3 actor in shareholders' equity. If the continuance of its liabilities is 1. and the coffer wants to immunize its net account adjoin absorption amount accident and appropriately set the continuance of disinterestedness according to zero, it should baddest assets with an boilerplate continuance of _________. A. 1. 22 B. 1. 50 C. 1. 60 D. 2. 00 A band pays anniversary interest. Its advertisement amount is 9%. Its amount at ability is $1,000. It matures in four years. Its crop to ability is currently 6%.            32. The continuance of this band is _______ years. A. 2. 44 B. 3. 23 C. 3. 56 D. 4. 10            33. The adapted continuance of this band is ______ years. A. 4. 00 B. 3. 56 C. 3. 36 D. 3. 05            34. A band with a 9-year continuance is account $1,080. 0 and its crop to ability is 8%. If the crop to ability avalanche to 7. 84%, you would adumbrate that the new amount of the band will be _________. A. $1,035 B. $1,036 C. $1,094 D. $1,124                35. Aback absorption ante increase, the continuance of a 20-year band affairs at a exceptional _________. A. increases B. decreases C. charcoal the same D. increases at aboriginal again decline              36. Continuance facilitates the allegory of bonds with differing ___________ A. absence risk B. about-face ratios C. maturities D. yields to maturity          37. The actual crop advance amid the AA band and the AAA band has been 25 base points. Currently, the advance is alone 9 base points. If you accept the advance will anon acknowledgment to its actual levels you should ________________________. A. buy the AA and abbreviate the AAA B. buy both the AA and the AAA C. buy the AAA and abbreviate the AA D. abbreviate both the AA and the AAA              38. The continuance of a band commonly increases with an access in _________. I. term-to-maturity II. yield-to-maturity. III. advertisement rate A. I only B. I and II only C. II and III only D. I, II and III            39. Compute the adapted continuance of a 9% coupon, a 3-year accumulated band with a crop to ability of 12%. A. 2. 45 B. 2. 75 C. 2. 88 D. 3. 00          40. An 8%, a 30-year band has a yield-to-maturity of 10% and a adapted continuance of 8. 0 years. If the bazaar crop drops by 15 base points, there will be a __________ in the bond's price. A. 1. 15% decrease B. 1. 20% increase C. 1. 53% increase D. 2. 43% decrease           41. To actualize a portfolio with a continuance of 4 years application a 5-year zero-coupon band and a 3 year 8% anniversary advertisement band with a crop to ability of 10%, one would accept to advance ________ of the portfolio amount in the zero-coupon bond. A. 50% B. 55% C. 60% D. 75%              42. Which of the afterward set of altitude will aftereffect in a band with the greatest amount volatility? A. A aerial advertisement and abbreviate maturity. B. A aerial advertisement and continued maturity. C. A low advertisement and abbreviate maturity. D. A low advertisement and continued maturity.           43. An broker who expects crumbling absorption ante would aerate their basic accretion by purchasing a band that has a ___ advertisement and a ___ appellation to maturity. A. low; long B. high; short C. high; long D. zero; long             44. A zero-coupon band is affairs at a abysmal abatement amount of $430. 00. It matures in 13 years. If the crop to ability of the band is 6. 7%, what is the continuance of the bond? A. 6. 7 years B. 8. 0 years C. 10 years D. 13 years            45. Appendage implies that continuance predictions _______. I. belittle the % access in band amount aback the crop falls II. belittle the % abatement in band amount aback the crop rises III. overestimates the % access in band amount aback the crop falls IV. overestimates the % abatement in band amount aback the crop rises A. I and III only B. II and IV only C. I and IV only D. II and III only 1. D2. B3. A4. C5. D6. B7. B8. D9. A10. A11. A12. D13. A14. A15. C16. A17. A18. A19. A20. D21. C22. C23. A24. C25. A27. C28. C29. C30. C31. A32. C33. C34. C35. B36. C37. C38. A39. A40. B41. B42. D43. D44. D45. C

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