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).
Q28. A mortgage bond is secured by a lien on real property.
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.
Q30. The yield to maturity on a bond:
a. is fixed in the indenture
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
Q31. The slope of the characteristic line of a security is that security’s Beta.
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?
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.
Q34. Preferred stock valuation usually treats the preferred stock as a:
a. capital asset
c. common stock
d. long-term bond
Q35. The formula for compound future value is:
a. FVn = PV(1+i)n
b. FVn = (1+i)/PV
c. FVn = PV/(1+i)n
d. FVn = PV(1+i)-n
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.
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)?
Q38. A security with a beta of one has a required rate of return equal to the overall market rate of return.
Q39. The current yield is greater than the coupon rate for a discount bond.
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.