Question 1
How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is $1,700?
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A. 
$249,235 
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B. 
$218,080 
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C. 
$264,812 
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D. 
$202,503 
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E. 
$233,658 
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F. 
$186,926 
6 points
Question 2
Shady Rack Inc. has a bond outstanding with 10 percent coupon, paid semiannually, and 15 years to maturity. The market price of the bond is $1,039.55. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be the percent change in the market price of the bond?
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A. 
17.76% 
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B. 
15.66% 
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C. 
14.01% 
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D. 
14.87% 
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E. 
16.39% 
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F. 
17.09% 
6 points
Question 3
Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 47, and $10 for the years 810. Thereafter, starting in year 11, the company will pay a constant dividend of $8/year forever. If you require 18 percent rate of return on investments in this risk class, how much is this stock worth to you?
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A. 
$37.77 
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B. 
$55.99 
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C. 
$45.68 
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D. 
$50.50 
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E. 
$41.46 
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F. 
$34.54 
6 points
Question 4
Your required rate of return is 12%. What is the net present value of a project with the following cash flows?
Year 
0 
1 
2 
3 
4 
5 

Cash Flow 
750 
450 
350 
150 
125 
100 

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A. 
15.56 


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B. 
48.68 


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C. 
26.33 


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D. 
60.27 


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E. 
72.15 


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F. 
37.37 


6 points
Question 5
Please use the following information for this and the following two questions.
BB Lean has identified two mutually exclusive projects with the following cash flows.
Year 
0 
1 
2 
3 
4 
5 
Cash Flow Project A 
52,000.00 
18,000.00 
17,000.00 
15,000.00 
12,000.00 
9,000.00 
Cash Flow Project B 
52,000.00 
17,800.00 
10,000.00 
12,000.00 
17,000.00 
22,000.00 
The company requires a 11.5% rate of return from projects of this risk.
What is the NPV of project A?
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A. 
972.57 
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B. 
5,972.87 
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C. 
417.37 
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D. 
1,395.64 
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E. 
1,624.90 
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F. 
5,180.35 
6 points
Question 6
What is the IRR of project B?
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A. 
12.06% 
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B. 
14.68% 
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C. 
13.90% 
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D. 
13.05% 
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E. 
12.94% 
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F. 
20.80% 
6 points
Question 7
At what discount rate would you be indifferent between these two projects?
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A. 
13.5250% 
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B. 
14.7386% 
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C. 
34.1306% 
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D. 
15.8950% 
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E. 
3.1177% 
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F. 
26.0812% 
6 points
Question 8
A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is $1,000. Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 10%. III. The bond’s current yield is 10%.
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A. 
III Only 
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B. 
I, II, and III 
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C. 
I, III Only 
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D. 
II, III Only 
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E. 
I Only 
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F. 
I, II Only 
6 points
Question 9
Riverhawk Corporation has a bond outstanding with a market price of $1,050.00. The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%. What is the bond’s coupon rate?
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A. 
12.84% 
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B. 
9.77% 
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C. 
10.54% 
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D. 
12.08% 
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E. 
11.31% 
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F. 
13.61% 
6 points
Question 10
You purchased a stock for $24 per share. The most recent dividend was $2.50 and dividends are expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock?
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A. 
17.00% 
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B. 
17.64% 
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C. 
18.38% 
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D. 
21.50% 
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E. 
20.27% 
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F. 
19.25% 
6 points
Question 11
Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today?
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A. 
$22.80 
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B. 
$15.96 
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C. 
$13.68 
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D. 
$25.08 
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E. 
$18.24 
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F. 
$20.52 
6 points
Question 12
Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share. Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter. What is the current market value of the ASI’s stock if companies in this risk class have a 16% required rate of return?
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A. 
$54.27 
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B. 
$56.03 
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C. 
$45.54 
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D. 
$42.87 
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E. 
$51.29 
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F. 
$48.35 
6 points
Question 13
The Retarded Company’s dividends are declining at an annual rate of 4 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock?
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A. 
$13.85 
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B. 
$19.20 
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C. 
$15.33 
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D. 
$17.09 
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E. 
$21.78 
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F. 
$12.57 
6 points
Question 14
The dividend yield of a stock is 10 percent. If the market price of the stock is $18 per share and its dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by the company?
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A. 
$1.53 
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B. 
$0.85 
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C. 
$1.70 
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D. 
$1.02 
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E. 
$1.19 
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F. 
$1.36 
6 points
Question 15
Last year, Jen and Berry Inc. had sales of $40,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Thirtyfive percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year?
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A. 
$12,667 
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B. 
$11,500 
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C. 
$10,636 
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D. 
$12,000 
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E. 
$13,250 
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F. 
$14,250 
6 points
Question 16
You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.5 percent and the inflation premium is 3 percent. US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form.
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A. 
6.35% 
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B. 
6.09% 
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C. 
5.58% 
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D. 
5.06% 
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E. 
5.32% 
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F. 
5.83% 
6 points
Question 17
Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below.

Bond X 
Bond Y 
Face value 
$1,000 
$1,000 
Annual Coupon Payment 
$120 
$130 
Payment Frequency 
Semiannual 
Annual 
Years to maturity 
15 
15 
Price 
$950.39 
? 
What is the price of bond Y?
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A. 
$1,007.15 
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B. 
$925.88 
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C. 
$989.75 
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D. 
$956.95 
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E. 
$940.92 
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F. 
$973.44 
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