5 years since an investor 5-year life. If purchased Treasury bonds that were off

Question

5 years since an investor 5-year life. If purchased Treasury bonds that were offering a 6% return over their 1 Investor sells now, he or she is likely to realize a total return that is: 4. Assume market interest rates have risen substantially in the greater than 6%. less than 6%. c.equal to 2%. D.equal to 6%. 5. Over the past 3 years an investment returned 18%,-12%, and 15%, what is the variance of returns? A. 231 8. 182 C. 546 D. 961 6. What is the return to an investor who purchases a stock for $30, receives a $1.50 dividend at the end of the year, and then sells the share for $28.50? A.-5% 8.0% c. 5% D. 10% 7. A convertible bond generally has a higher market value than a comparable non-convertible bond True False

Explanation / Answer

Question

Answer

4-

B

less than6%

because market interest rates has increased which results in lower return

5-

B

Year

return

1

18

2

-12

3

15

Variance =using variance function in ms excel spreadsheet =varp(18,-12,15)

182

6-

B

return = dividend+(selling price-purchase price)/purchase price

(1.5 +(28.5-30))/30

0

7-

TRUE

8-

C

10*1

10million

9-

D

1000000/20000

50

10-

C

stock price rises above 40

11-

FALSE

15-

C

EPS increased by 40% to 17.5

no of share = net income/eps

(1500000-250000)/12.5

100000

new eps

(2000000-250000)/100000

17.5

16-

D

17-

B

after tax cost of debt = before tax cost of debt*(1-tax rate)

15*(1-.35)

9.75

18-

c

Question

Answer

4-

B

less than6%

because market interest rates has increased which results in lower return

5-

B

Year

return

1

18

2

-12

3

15

Variance =using variance function in ms excel spreadsheet =varp(18,-12,15)

182

6-

B

return = dividend+(selling price-purchase price)/purchase price

(1.5 +(28.5-30))/30

0

7-

TRUE

8-

C

10*1

10million

9-

D

1000000/20000

50

10-

C

stock price rises above 40

11-

FALSE

15-

C

EPS increased by 40% to 17.5

no of share = net income/eps

(1500000-250000)/12.5

100000

new eps

(2000000-250000)/100000

17.5

16-

D

17-

B

after tax cost of debt = before tax cost of debt*(1-tax rate)

15*(1-.35)

9.75

18-

c

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