MULTIPLE CHOICE Choose the one alternative that best completes the statement or

Question

MULTIPLE CHOICE Choose the one alternative that best completes the statement or 1) What is the approximate yield to maturity for a $1,000 par value bond selling for $1,120 that in 6 years and pays 12 percent interest annually A9.3 percent B) 12.0 percent 2) What is the current price of a $1,000 par value bond maturing in 12 years with C) 13.2 percent a coupon percent, paid semiannually, that has a YTM of 13 percent? A) $604 B) $1,073 D) $1,090 3) T angshan Industries has issued a bond which has a $1,000 par value and a 15 percent annual coupon interest rate. The bond will mature in ten years and currently sells for $1,250. Using this Information, the yield to maturity on the Tangshan Industries bondnt ) 11.39 percent A) 13.29 percent B)10.79 percent 4) 4 The current price of DEF Corporation stock is $26.50 per share. Eamings next year should be $2 per share and it should pay a $1 dividend. The P/E multiple is 15 times on average. What price wou you expect for DEF's stock in the future? A) $30.00 B) $13.50 $26.50 D) $15.00 5) 5) At year end, Tangshan China Company balance sheet showed total assets of s60 mifllion, total liabilities (including preferred stock) of $45 million, and 1,000,000 shares of common outstanding. If Tangshan could sell its assets for $52.5 million, Tangshan's liquidation value per share of common stock is A) $75 B) $52.50 $15 6) You are planning to purchase the stock of Ted's Sheds Inc. and you expect it to pay a dividend of $3 6) in 3 years. If in 1 year, $A4.25 in 2 years, and $6.00 in 3 years. You expect to sell the stock for $100 your required return for purchasing today? the stock is 12 percent, how much would you pay for the stodk C) $77.24 D) $81.52 A) $75.45 B) $85.66 7) Smith Co rporation's common stock is expected to pay a dividend of $3.00 forever and currently sells for $21.42. What is the required rate of return? D) 14% A) 13% B) 12% C) 10% 8) Daniel Custom Cycles' common stock currently pays no dividends. The company plans to begin grow at 5 percent per year thereafter. Given a required return of 15 percent, what would you pay for the stock today? paying dividends beginning 3 years from today. The first dividend will be $3.00 and dividends will $29.86 D) $25.33 B) $22.68 A) $18.73

Explanation / Answer

4) Curent market price 26.5 Earning per share 2 Dividend per share 1 PE Multiple 15 times PE ratio= Market price/Earning per share 15=Market price/2 Market price 30 $ Answer is A. 6) Year Dividend PVF@12% Present value of dividend 1 3 0.89 2.68 2 4.25 0.80 3.39 3 6 0.71 4.27 100 0.71 71.20 81.54 Value of stock today 81.52 Answer is D. 7) Required rate of return=Dividend/Curent market price 0.140056022 14% answer is D.

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