FIN 401 Study Guide - Midterm Guide: List Of Beavis And Butt-Head Characters, Capital Structure, Operating Lease

179 views8 pages

skydolphin894

4 May 2013

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Midterm 2010: you have invested ,500 in an account that earns 8% compounded semi-annually. You plan on making additional payments of per month into this account for the next five years. How much will your investment be worth in 5 years: ,344, ,153, ,654, ,321 e. ,538, you plan on buying a bottling machine for million, which can be salvaged for. Your tax rate is 43% and the cca rate is 30%. What is present value of the cca tax sheild: ,447, ,521, ,781 d. , 402, ,348, you have the following two bonds that are identical except for coupon rate and price. 1: you have the following information on the following stock. P0 = . 72. g =3. 5% r = 12% What is the dividend payout ratio: 0. 3, 0. 4, 0. 5, 0. 6, 0. 7, your firm is financed by 40% equity and 60% debt. The cost of equity is16% and the cost of debt is 7%.

Related Questions

1. Suppose you purchased a bond with a 5% annual coupon payment that expires in 10. Two years later the risk-free rate is 7%. Have you been exposed to interest rate risk? Have you been exposed reinvestment risk? Briefly explain why and what interest and reinvestment risk are.

2. Assuming all other bond characteristics are identical which bond would pay a higher coupon payment? Very briefly explain why.

a. A callable bond or a convertible bond

b. A bond with negative covenants vs a bond without negative covenants

c. A Treasury Strip or a regular Treasury bond

d. A secured vs unsecured bond

3. A coupon bond pays interest semi-annually, matures in 30 years, has coupon rate of 4% and is currently selling for $700. What is the annual YTM? Show your work.

4. A semi-annual step-up bond matures in 11 years and pays zero coupon payments for the first 5 years. During the remaining life of the bond it pays a 5% coupon payment. If the bond has a YTM of 8% what is the current price of the bond? Show your work.

5. Why are money markets needed in addition to banks? What cost advantages do the money markets provide?

6. Briefly describe the main differences between the following money market securities:

a. Repurchase agreements and federal funds

b. Commercial paper and treasury bills

scarlethyena149

You plan to buy a car 3 years from now and plan to take out a 3-year car loan. Given the following yield curve and assume that the spot rates are continuous compounded, what will be the interest rate for your car loan?

Yrs to Maturity	1	2	3	4	5	6	7
% yield	4	5	6	7	8	9	10

2. Given the following treasury bonds, calculate the 18-month zero rate. Assume face value of each bond is 100 and coupons are paid semi-annually.

Bond	Yrs to Maturity	Annual coupon rate%	Bond price
A	0.5	0	98
B	1	8	98
C	1.5	9	104

SHOW ALL WORK. Preferred if you showed how to do it on bothfinancial calculator and by hand.

1. You plan to retire in 35 years. At the endof each year, you plan on saving $15,000, and your bank pays you 2%annual interest. How much will you have saved by the time youretire?

A. $749,917

B. $374,979

C. $525,000

D. $262, 514

2. A bond with a face value of$1,000 pays a 10% (APR) semiannual coupon, and matures in 10 years.Similar bonds trade at a YTM of 8% (APR). What is the price of thebond?

A. $1,000

B. $679.52

C. $1,134.20

D. $1,135. 91

PROBLEMS 3 and 4 ARE CONNECTED

3. A major car manufacturing firm issues a 20year $1,000,000 bond at par. The bond pays a 6% (APR) semiannualcoupon. 5 years later, the Federal Reserve Board cuts the fed fundsrate, causing interest rates for similar firms to fall to 4% (APR).What is the new bond price?

A. $1,222,368

B. $1,223,965

C. $1,000,000

D. $1,273,555

4. . If you bought the bond at issueand held it to maturity, what is the effective annual rate (EAR)that you earned?

A. 6%

B. 6.09%

C. 4%

D. 4.04%

5. The nominal rate quoted in themarket is 8% per annum, and interest is paid every month. What isthe effective annual rate (EAR)?

A. 8%

B. 8.3%

C. 0.67%

D. 96%

erinsalmon303

FIN 401 Study Guide - Midterm Guide: List Of Beavis And Butt-Head Characters, Capital Structure, Operating Lease

Document Summary

Get access

Related Documents

FIN 401 Lecture 8: Fin401_MT_W08_Wednesday_V1_Solution.doc

FIN 401 Study Guide - Midterm Guide: Risk Premium, Net Present Value, Discount Window

FIN 401 Study Guide - Midterm Guide: Net Present Value, Cash Flow, Discount Window

Related Questions