2024 – 1 Consider some bonds with one annual coupon payment of 7 25 The bonds have a par

1. Consider some bonds with one annual coupon payment of 7.25%. The bonds have a par value of $1,000, a current price of $1,125, and they will mature in 13 years. What is the yield to maturity on these bonds? (Points : 2)

Question 2. 2. Tom O’Brien has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio’s beta? 

(Points : 2)

Question 3. 3. Desreumaux Inc.’s stock has an expected return of 12.25%, a beta of 1.25, and is in equilibrium. If the risk-free rate is 5.00%, what is the market risk premium? 

(Points : 2)

Question 4. 4. Wachowicz Corporation issued 15-year, non-callable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity? (Points : 2)

Question 5. 5. Sinking funds are devices used to force companies to retire bonds on a scheduled basis prior to their maturity. Many bond indentures allow the company to acquire bonds for a sinking fund by either purchasing bonds in the market or selecting the bonds to be acquired by a lottery administered by the trustee through a call at face value. (Points : 2)

Question 6. 6. The standard deviation is a better measure of risk than the coefficient of variation if the expected returns of the securities being compared differ significantly. (Points : 2)

Question 7. 7. Which of the following statements is CORRECT? (Points : 2)

Question 8. 8. Under normal conditions, which of the following would be most likely to increase the coupon rate required to enable a bond to be issued at par? (Points : 2)

Question 9. 9. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? (Points : 2)

Question 10. 10. If a firm raises capital by selling new bonds, it is called the “issuing firm,” and the coupon rate is generally set equal to the required rate on bonds of equal risk. (Points : 2)