Print Your Name FINC330-EXAM III-Fall 2017 Instructions: For each question, choo

Question

Print Your Name FINC330-EXAM III-Fall 2017 Instructions: For each question, choose the best answer from those provided and mark the answer on your Scantron sheet accordingly. You may use one 8.5 by 11 inch handwritten (NO photocopies, NO word-processing, etc...) equation sheet while taking this exam. Make sure your exam has 30 questions. 1. What is the price immediately after a coupon is paid on a S1000 par value bond with twenty annual coupon payments remaining, coupon rate of nine-percent, and yield to maturity of ten-percent? A) S1000 B) Less than $1000 C) Greater than $1000 D) Cannot be determined; insufficient information 5. Consider the bond in the previous two questions. Calculate the expected capital gains yield over the next year if the yield to maturity remains unchanged at 9 percent. A) 2-percent B)0.5-percent C) 0.2-percent D) Zero E) Minus 1-percent 2. Consider two bonds; both bonds have the same par value and the exact same coupon payments remaining. Then the bond with the higher price will have: A) Lower yield to maturity B) Same yield to maturity C) Higher yield to maturity D) A higher return E) None of the above 6. The issuer of a bond determines the: A) Par value, coupon rate and market value B) Yield to maturity, coupon rate, and par value C) Maturity, coupon rate, and par value D) Yield to maturity and coupon rate E) None of the above 3. Consider a bond with ten years to maturity, eight-percent coupon rate, $1000 par value and 9-percent yield to maturity. Suppose an annual coupon has just been paid, calculate the bond price. A) $1067.10 B)$1005.46 CS1000 D) $975.23 E) S935.82 7. Calculate the ex-dividend price immediately after a $2.40 dividend was paid on a preferred stock having a zer dividend growth rate per period and a discount rate of ten percent per period A)S10 B)$12 C) $20 D) $22 E) $24 8. Calculate the ex-dividend price immediately after a $3.60 dividend was paid on a common stock having a constant dividend growth rate of three-percent per period 4. Consider the bond in the previous question. Calculate the and a discount rate (required returm) of 9-percent per period. A) $61.8 B) S60 C)S56.4 D)S41.2 E)$40 expected coupon yield over the next year if the yield to maturity remains unchanged at 9-percent. A) 9-percent B)8.5-percent C) 8-percent D) 1-percent E) Zero

Explanation / Answer

1)

Hence, correct option is (B)

1 Par value (FV) $                                          1,000 2 Coupon rate 9.00% 3 Number of compounding periods per year 1 4 = 1*2/3 Interest per period (PMT) $                                          90.00 5 Number of years to maturity 20 6 = 3*5 Number of compounding periods till maturity (NPER) 20 7 Market rate of return/Required rate of return 10.00% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 10.00% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $                                       914.86

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