# Business

** Q27. N. Ron Corp. preferred stock pays a $.15 annual dividend. What is the value of the stock if your required rate of return is 25% (round your answer to the nearest $1).
** a. $.06

b. $.60

c. $6.00

d. $60.00

**a. true**

Q28. A mortgage bond is secured by a lien on real property.

Q28. A mortgage bond is secured by a lien on real property.

b. false

**a. true**

Q29. The present value of a single future sum of money is inversely related to both the number of years until payment is received and the discount rate.

Q29. The present value of a single future sum of money is inversely related to both the number of years until payment is received and the discount rate.

b. false

**a. is fixed in the indenture**

Q30. The yield to maturity on a bond:

Q30. The yield to maturity on a bond:

b. is lower for higher risk bonds

c. is the required rate of return on the bond

d. is generally below the coupon interest rate

**a. true**

Q31. The slope of the characteristic line of a security is that security’s Beta.

Q31. The slope of the characteristic line of a security is that security’s Beta.

b. false

**a. 10.9%**

Q32. You are considering an investment in First Allegiance Corp. The firm has a beta of 1.62. Currently, U.S. Treasury bills are yielding 6.75% and the expected return for the S & P 500 is 18.2%. What rate of return should you expect for your investment in First Allegiance?

Q32. You are considering an investment in First Allegiance Corp. The firm has a beta of 1.62. Currently, U.S. Treasury bills are yielding 6.75% and the expected return for the S & P 500 is 18.2%. What rate of return should you expect for your investment in First Allegiance?

b. 25.3%

c. 16.8%

d. 29.5%

**a. $1,066**

Q33. Assume that WhirledCom has an issue of 15-year $1,000 par value bonds that pay 6% interest, semiannually. Further assume that today’s required rate of return on these bonds is 9%. How much would these bonds sell for today? Round off to the nearest $1.

Q33. Assume that WhirledCom has an issue of 15-year $1,000 par value bonds that pay 6% interest, semiannually. Further assume that today’s required rate of return on these bonds is 9%. How much would these bonds sell for today? Round off to the nearest $1.

b. $756

c. $1,321

d. $864

**a. capital asset**

Q34. Preferred stock valuation usually treats the preferred stock as a:

Q34. Preferred stock valuation usually treats the preferred stock as a:

b. perpetuity

c. common stock

d. long-term bond

**a. FV**

Q35. The formula for compound future value is:

Q35. The formula for compound future value is:

_{n}= PV(1+i)

^{n}

b. FV

_{n}= (1+i)/PV

c. FV

_{n}= PV/(1+i)

^{n}

d. FV

_{n}= PV(1+i)

^{-n}

**a. 18%**

Q36. What is the yield to maturity of a 16-year bond that pays a coupon rate of 8% per year, has a $1,000 par value, and is currently priced at $916? Round your answer to the nearest whole percent and assume semi-annual coupon payments.

Q36. What is the yield to maturity of a 16-year bond that pays a coupon rate of 8% per year, has a $1,000 par value, and is currently priced at $916? Round your answer to the nearest whole percent and assume semi-annual coupon payments.

b. 11%

c. 9%

d. 7.5%

**a. $921**

Q37. How much money must be put into a bank account yielding 3.5% (compounded annually) in order to have $1,250 at the end of 10 years (round to nearest $1)?

Q37. How much money must be put into a bank account yielding 3.5% (compounded annually) in order to have $1,250 at the end of 10 years (round to nearest $1)?

b. $886

c.$843

c. $798

**a. true**

Q38. A security with a beta of one has a required rate of return equal to the overall market rate of return.

Q38. A security with a beta of one has a required rate of return equal to the overall market rate of return.

b. false

**a. true**

Q39. The current yield is greater than the coupon rate for a discount bond.

Q39. The current yield is greater than the coupon rate for a discount bond.

b. false

**a. $410**

Q40. What is the value of a bond that matures in 20 years, makes an annual coupon payment of $40, and has a par value of $1,000? Assume a required rate of return of 10%, and round your answer to the nearest $10.

Q40. What is the value of a bond that matures in 20 years, makes an annual coupon payment of $40, and has a par value of $1,000? Assume a required rate of return of 10%, and round your answer to the nearest $10.

b. $490

c. $500

d. $520