assignmentcafe.com –
Letgo Corp. is experiencing steady growth and are expecting that dividends will grow at a constant rate of 2.5 percent for indefinite future. The required rate of return is given as 11 percent. If the stock of Letgo Corp. is currently selling for $54.10, Calculate the dividend expected next year (D1)
Group of answer choices
$3.57
$4.49
$4.36
$4.60
$4.15
Question 2
OutofFashion Inc. is facing financial difficulties. The most recent dividend declared was $3.62 and this dividend is expected to shrink at a constant rate of 2.5 percent annually forever. What is this stock worth today at a required return of 12.5 percent?
Group of answer choices
$34.15
$20.24
$23.53
$23.56
$37.11
Question 3
Twincity Corporation stock is selling in the market for $60. There are three vacancies to be filled on the board of directors. Mr. Majority wishes to be elected on one of these positions on BOD. There are 200,000 share currently outstanding for Twincity Corp. how much total investment Mr. Majority needs to make to guarantee being elected on board of directors under following two conditions:
a. if the company uses straight voting?
b. If the company uses cumulative voting?
Group of answer choices
$4,000,060; $3,000,060
$6,000,060; $2,400,060
$6,000,060; $3,000,060
$4,000,060; $2,400,060
$12,000,000; $2,400,060
Question 4
ABC Corp has preferred shares that are currently selling in the market for $66.10 per share. The par value of these shares is $100. Calculate the dividend on these preferred stock expected two years from now (D2). The required rate of return is given as 8.25%.
Group of answer choices
$5.42
$5.09
$5.45
$5.57
$5.25
question 5
Calculate the stock price of CMM Corp. expected four years from today (P4). The required rate of return is given as 15.5%. The stock just paid a dividend of $1.55. This dividend is expected to grow at a constant rate of 2% for foreseeable future.
Group of answer choices
$12.61
$13.07
$12.68
$12.94
$12.16
question 7
Worst Buy Corp. has a strange dividend outlook. This firm has just paid a dividend of $1 and expects to pay $1.25 one year from today; $1.75 two years from today and $2.00 three years from today. After that period the dividend policy will stabilize and dividends are expected to grow at a constant rate of 4.5% for indefinite future. If the required rate of return is 11%, calculate the stock’s current market value.
Group of answer choices
$15.67
$27.52
$16.08
$18.18
$28.52
question 8
Lulu Lannan apparel company’s stock is currently selling in the market for $25.34 per share. This stock is expecting to pay a dividend if $1.95 per share next year, and the dividends are expected to grow at a certain constant rate forever. The required rate of return is 9.5 percent. Calculate the capital gains yield for this stock.
Group of answer choices
1.84%
7.66%
1.98%
7.52%
9.5%
question 10
APJAY Corp. has 6.15% coupon bonds with 20 years left to maturity. These bonds pay coupon semiannually. The current market price of these bonds is $1055.25. Last coupon payment was received two months ago. If you just purchased this bond what is the invoice price (dirty price)?
Group of answer choices
$1,065.50
$1,116.50
$1,055.25
$1010.50
$1,075.76
Question 11
Micro Robos Inc. has 6.75% coupon bonds with 10 year maturity remaining and current market value of $975.80. These bonds pay coupon semi annually. The firm wants to sell additional 10-year maturity bonds now at par with coupon rate being same as the current market rate of interest. What coupon rate should the firm set on these new bonds?
Group of answer choices
3.80%
7.48%
7.59%
3.55%
7.09%
Question 12
One year ago ACB Corp. issued 15-year maturity bonds, at par with coupon rate of 8.75% paid semiannually. Interest rates have since gone down and currently the yield to maturity on these bonds is 7.5%. Calculate the percentage change in price of the bond from last year to this year.
Group of answer choices
11.35%
10.85%
-5.87%
10.72%
-10.48%
Question 13
Which one of the following statements is false?
Group of answer choices
The yield to maturity on a par bond is equal to the bond’s coupon rate.
A premium bond has a yield to maturity that exceeds the bond’s coupon rate.
The current yield on a premium bond is more than the bond’s yield to maturity.
A discount bond has a coupon rate that is less than the bond’s yield to maturity.
The current yield on a par value bond is equal to the bond’s yield to maturity
Question 14
Risk averse investors would take risks only if suitably compensated and therefore they would choose to minimize risk. Such a risk averse investor will prefer to invest money in which of the following bonds to minimize interest rate Price risk:
Group of answer choices
2-year maturity, 10 percent coupon bonds.
20-year maturity, 6 percent coupon bonds.
2-year maturity, 7 percent coupon bonds.
20-year maturity, zero coupon bonds.
5-year maturity, 7 percent coupon bonds.
Question 15
Several state and municipal bodies raise funds by issuing municipal bonds that are commonly called Munis. Choose from the following list which investor is most likely to invest in a municipal bond as against a corporate bond.
Group of answer choices
An individual in a high income tax bracket
Retired individual with minimal current income
Recent college graduate
Tax-exempt organizations
Minimum-wage employee
Question 16
Original Issue Discount (OID) bonds sell originally and a price much below the par value. These bonds make only one payment of the principal at maturity and nothing in between. Which of the following bonds will qualify under this definition of OID?
Group of answer choices
Callable bonds
Convertible bonds
Zero coupon bonds
Income bonds
Debentures
Question 17
The Gab corporation bonds are currently selling in the market. These bonds have 7 years left to maturity and have a coupon rate of 6.53% paid annually. If the interest rate in the market is currently 4.5%, calculate the current market price of this bond.
Group of answer choices
$1,119.62
$1,087.39
$959.60
$1147.21
$887.39
question 18
Following deposits are made in your investment fund account. If the interest rate earned is 6.8%, find the future value of these savings ten years from now
0 1 2 3 4 5 6 7 8 9 10
|———|———-|———|———|———|———|——–|———|———|———-|
0 0 8500 9300 0 0 7100 0 0 0 0
Group of answer choices
$42,321.68
$38,364.35
$44,564.54
$37,235.16
$19,870.80
Question 19
Cam Pewton took a loan of $680,000 to start a new restaurant. The loan is for 15 years and monthly payments at an APR of 8.35%. How much total interest is paid on this loan in the first year?
Group of answer choices
$49,523.45
$56,780.00
$23,754.33
$55,884.56
$58,125.68
Question 20
Alex has been saving up for retirement at age 65. His investment account earns an average of 8.75% interest. Alex wishes to withdraw $50,000 from his account each year for 25 years after retirement. The first withdrawal will come at the beginning of the year when he retires. How much money does Alex need to accumulate in this account on the day he retires?
Group of answer choices
$501,245.83
$545,104.84
$502,341.15
$507,833.93
$462,718.85
question 21
Pennylane has just taken a loan of 4-years to buy a car. Based on her monthly budget, she can only afford car payments of $185 a month for 48 months. If the interest rate on this loan is is 4.25 percent, how much Maximum money can she can borrow for this car?
Group of answer choices
$8,152.98
$8,316.48
$7,899.60
$8,022.15
$7,931.44
questin 22
TIBB offers a perpetuity that pays end of year annual payments of $120,000 forever. Present value of this contract is $1,900,000 today. What is the interest rate implied in this contract?
Group of answer choices
4.45%
5.86%
6.32%
6.15%
4.29%
question 25
April has an investment account that pays annual interest rate of 0.89%. If April deposited $13,000 into this account, how much total interest on interest will she earn over the next 6 years?
Group of answer choices
$14.01
$15.63
$14.93
$13.73
$694.20
Question 26
You bought some stocks worth $10,600 when you were 18 years old. Today your portfolio is worth $42,441.92. Your account has earned an average rate of return of 4.9% annually over all these years. How old are you now?
Group of answer choices
35 Years
29 years
55 years
47 years
42 years
question 27
John wants to buy a new TV with a price of $1,979. However, he only has $1,090 with him today. His savings account earns a return of 5.2%. Assuming that the price of TV will not change, how long will John have to wait to be able to buy this TV?
Group of answer choices
11.49 years
11.83 years
11.34 years
12.51 years
11.77 years
question 28
You have just taken a home equity loan for $82,500 payable in equal monthly payments over the next 25 years. The appropriate rate of interest charged is 4.75% compounded monthly.
