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25-07-2018

1.Tri State Pickle Company preferred stock pays a perpetual annual dividend of 2.5% of its par value. Par value of TSP preferred stock is $100 per share. If investors' required rate of return on this stock is 15%, what is the value of per share?

a.

$37.50

b.

$15.00

c.

$16.67

d.

$6.00

2.Tri State Pickle Company preferred stock pays a perpetual annual dividend of 2.5% of its par value. Par value of TSP preferred stock is $100 per share. If investors' required rate of return on this stock is 15%, what is the value of per share?

a.

$37.50

b.

$15.00

c.

$16.67

d.

$6.00

3.The detailed legal agreement between a bond's issuer and its trustees is known as the

a.

collateral agreement.

b.

call provision.

c.

indenture.

d.

covenant.

 

4.The shareholder can cast all votes for a single candidate or split them among various candidates through

a.

proxy fights.

b.

cumulative voting.

c.

call provisions.

d.

majority voting.

5.Stones Corporation's ROE is 15%. Their dividend payout ratio is 30%. The last dividend, just paid, was $2.58. If dividends are expected to grow by the company's sustainable growth rate indefinitely, what is the current value of Stones common stock if its required return is 18%?

a.

$14.33

b.

$38.012

c.

$47.67

d.

$66.61

6.Gap Inc. has a bond outstanding that was issued 20 years ago at a coupon rate of 9%. The $1,000 par value bond pays interest semiannually. If today's interest rate is 14%, what is the value of the bond today?

a.

$654.98

b.

$735.15

c.

$814.42

d.

$666.68

 

7.You are evaluating the purchase of Casio, Inc. common stock which currently pays $2 dividend and is expected to do so for many years. You have bought the stock and will hold for the next 3 years. If your required rate of return is 16%, what is the stock worth today, given the Selling price of the stock is $51.5.

a.

$59.74

b.

$51.25

c.

$32.99

d.

$37.485

8.A block trade is a trade involving 10,000 or more shares by a single holder.

a.

True

b.

False

9.The GAP's most recent earnings per share were $3.75. Analysts forecast next year's earnings per share at $7.88. If the appropriate P/E ratio is 12, a share of GAP stock should be valued at

a.

$28.20.

b.

$94.56

c.

$87.23.

d.

$48.57.

10.Shorter-term bonds have greater interest rate risk than do longer-term bonds.

a.

True

b.

False

11.What is the value of a bond that matures in three years, has an annual coupon payment of $110, and a par value of $1,000? Assume a required rate of return of 11%, and round your answer to the nearest $10.

a.

$970

b.

$1,020

c.

$330

d.

$1,000

12.Noke Corp. just paid a dividend of $1.65 on its common stock. This company's dividends are expected to grow at a constant rate of 3% indefinitely. If the required rate of return on this stock is 11%, compute the current value of per share of Noke's stock.

a.

$20.63

b.

$21.24

c.

$15.00

d.

$55.00

13.As interest rates, and consequently investors' required rates of return, change over time, the ________ of outstanding bonds will also change.

a.

maturity date

b.

coupon interest payment

c.

par value

d.

price

14.Trading on the Nada is done electronically and does not require a physical location.

a.

True

b.

False

15.CEOs naming friends to the board of directors and paying them more than the norm is an example of the

a.

agency problem.

b.

preemptive right.

c.

majority voting feature.

d.

proxy fights.

16.Which of the following bond types has the greatest risk for investors?

a.

Debentures

b.

Mortgage bonds

c.

Floating rate bonds

d.

Subordinated debentures

17.The par value of a corporate bond indicates the level of interest payments that will be paid to investors.

a.

True

b.

False

18. Honda Motors has a $1,000 par value, 8% annual coupon bond with interest payable semiannually with a remaining term of 15 years. The annual market yield on similar bonds is 6%. This bond will sell at a discount from par.

a.

True

b.

False

19.An example of a primary market transaction is

a.

a new issue of stock by Evergreen Solar.

b.

a purchase of Microsoft stock on Nasdaq.

c.

Target repurchasing some its own stock from an investor.

d.

a sale of IBM stock on the NYSE.

20.An issue of common stock currently sells for $40.00 per share, has an expected dividend to be paid at the end of the year of $2.00 per share, and has an expected growth rate to infinity of 5% per year. The expected rate of return on this security is

a.

5%.

b.

10.25%.

c.

13.11%.

d.

10%.

21.Bonds that sell at a discount have a coupon rate lower than the market interest rate.

a.

True

b.

False

 

 

Product code: Finance-QA153

   

 

 

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