# 2024 – Question 1 How much did you borrow for your house if your

2024 – Question 1 How much did you borrow for your house if your.

Question 1

## Monthly mortgage payment

How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is \$1,700?

A.

\$249,235

B.

\$218,080

C.

\$264,812

D.

\$202,503

E.

\$233,658

F.

\$186,926

6 points

## >question 2Question 2Shady Rack Inc. has a bond outstanding with 10 percent coupon, paid semiannually, and 15 years to maturity. The market price of the bond is \$1,039.55. Calculate the bond’s yield to maturity (YTM). >[removed] >[removed] [removed] < < A. -17.76% >[removed] >[removed] [removed] B. -15.66% >[removed] >[removed] [removed] < C. -14.01% >[removed] >[removed] [removed] D. -14.87% >[removed] >[removed] [removed] E. -16.39% >[removed] >[removed] [removed] < F. -17.09% 6 points  Question 3Sanaponic, Inc. will pay a dividend of \$6 for each of the next 3 years, \$8 for each of the years 4-7, and \$10 for the years 8-10.  Thereafter, starting in year 11, the company will pay a constant dividend of \$8/year forever. >[removed] >[removed] [removed] < < A. \$37.77 >[removed] >[removed] [removed] B. \$55.99 >[removed] >[removed] [removed] < C. \$45.68 >[removed] >[removed] [removed] D. \$50.50 >[removed] >[removed] [removed] E. \$41.46 >[removed] >[removed] [removed] < F. \$34.54 6 points  Question 4Your required rate of return is 12%. What is the net present value of a project with the following cash flows?   Year 0 1 2 3 4 5 Cash Flow -750 450 350 150 125 -100 >[removed] >[removed] [removed] < < A. 15.56   >[removed] >[removed] [removed] B. 48.68   >[removed] >[removed] [removed] < C. 26.33   >[removed] >[removed] [removed] D. 60.27   >[removed] >[removed] [removed] E. 72.15   >[removed] >[removed] [removed] < F. 37.37                       6 points  Question 5Please use the following information for this and the following two questions.BB Lean has identified two mutually exclusive projects with the following cash flows.   Year 0 1 2 3 4 5 Cash Flow Project A -52,000.00 18,000.00 17,000.00 15,000.00 12,000.00 9,000.00 Cash Flow Project B -52,000.00 17,800.00 10,000.00 12,000.00 17,000.00 22,000.00 The company requires a 11.5% rate of return from projects of this risk.   What is the NPV of project A? >[removed] >[removed] [removed] < < A. 972.57 >[removed] >[removed] [removed] B. 5,972.87 >[removed] >[removed] [removed] < C. 417.37 >[removed] >[removed] [removed] D. 1,395.64 >[removed] >[removed] [removed] E. 1,624.90 >[removed] >[removed] [removed] < F. 5,180.35 6 points  Question 6What is the IRR of project B? >[removed] >[removed] [removed] < < A. 12.06% >[removed] >[removed] [removed] B. 14.68% >[removed] >[removed] [removed] < C. 13.90% >[removed] >[removed] [removed] D. 13.05% >[removed] >[removed] [removed] E. 12.94% >[removed] >[removed] [removed] < F. 20.80% 6 points  Question 7At what discount rate would you be indifferent between these two projects? >[removed] >[removed] [removed] < < A. 13.5250% >[removed] >[removed] [removed] B. 14.7386% >[removed] >[removed] [removed] < C. 34.1306% >[removed] >[removed] [removed] D. 15.8950% >[removed] >[removed] [removed] E. 3.1177% >[removed] >[removed] [removed] < F. 26.0812% 6 points  Question 8A bond with a face value of \$1,000 has annual coupon payments of \$100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is \$1,000. Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 10%. III. The bond’s current yield is 10%. >[removed] >[removed] [removed] < < A. III  Only >[removed] >[removed] [removed] B. I, II, and III >[removed] >[removed] [removed] < C. I, III  Only >[removed] >[removed] [removed] D. II, III  Only >[removed] >[removed] [removed] E. I  Only >[removed] >[removed] [removed] < F. I, II  Only 6 points  Question 9Riverhawk Corporation has a bond outstanding with a market price of \$1,050.00.  The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%.  What is the bond’s coupon rate? >[removed] >[removed] [removed] < < A. 12.84% >[removed] >[removed] [removed] B. 9.77% >[removed] >[removed] [removed] < C. 10.54% >[removed] >[removed] [removed] D. 12.08% >[removed] >[removed] [removed] E. 11.31% >[removed] >[removed] [removed] < F. 13.61% 6 points  Question 10You purchased a stock for \$24 per share. The most recent dividend was \$2.50 and dividends are expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock? >[removed] >[removed] [removed] < < A. 17.00% >[removed] >[removed] [removed] B. 17.64% >[removed] >[removed] [removed] < C. 18.38% >[removed] >[removed] [removed] D. 21.50% >[removed] >[removed] [removed] E. 20.27% >[removed] >[removed] [removed] < F. 19.25% 6 points  Question 11Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of \$4.00 per share. >[removed] >[removed] [removed] < < A. \$22.80 >[removed] >[removed] [removed] B. \$15.96 >[removed] >[removed] [removed] < C. \$13.68 >[removed] >[removed] [removed] D. \$25.08 >[removed] >[removed] [removed] E. \$18.24 >[removed] >[removed] [removed] < F. \$20.52 6 points  Question 12Apple Sink Inc. (ASI) just paid a dividend of \$2.50 per share.  Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter. >[removed] >[removed] [removed] < < A. \$54.27 >[removed] >[removed] [removed] B. \$56.03 >[removed] >[removed] [removed] < C. \$45.54 >[removed] >[removed] [removed] D. \$42.87 >[removed] >[removed] [removed] E. \$51.29 >[removed] >[removed] [removed] < F. \$48.35 6 points  Question 13The Retarded Company’s dividends are declining at an annual rate of 4 percent.  The company just paid a dividend of \$4 per share.  You require a 16 percent rate of return.  How much will you pay for this stock? >[removed] >[removed] [removed] < < A. \$13.85 >[removed] >[removed] [removed] B. \$19.20 >[removed] >[removed] [removed] < C. \$15.33 >[removed] >[removed] [removed] D. \$17.09 >[removed] >[removed] [removed] E. \$21.78 >[removed] >[removed] [removed] < F. \$12.57 6 points  Question 14The dividend yield of a stock is 10 percent. If the market price of the stock is \$18 per share and its dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by the company? >[removed] >[removed] [removed] < < A. \$1.53 >[removed] >[removed] [removed] B. \$0.85 >[removed] >[removed] [removed] < C. \$1.70 >[removed] >[removed] [removed] D. \$1.02 >[removed] >[removed] [removed] E. \$1.19 >[removed] >[removed] [removed] < F. \$1.36 6 points  Question 15Last year, Jen and Berry Inc. had sales of \$40,000, cost of goods sold (COGS) of 12,000, depreciation charge of \$3,000 and selling, general and administrative (SG&A) cost of \$10,000. The interest costs were \$2,500. Thirty-five percent of SG&A costs are fixed costs. >[removed] >[removed] [removed] < < A. \$12,667 >[removed] >[removed] [removed] B. \$11,500 >[removed] >[removed] [removed] < C. \$10,636 >[removed] >[removed] [removed] D. \$12,000 >[removed] >[removed] [removed] E. \$13,250 >[removed] >[removed] [removed] < F. \$14,250 6 points  Question 16You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.5 percent and the inflation premium is 3 percent.  US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form. >[removed] >[removed] [removed] < < A. 6.35% >[removed] >[removed] [removed] B. 6.09% >[removed] >[removed] [removed] < C. 5.58% >[removed] >[removed] [removed] D. 5.06% >[removed] >[removed] [removed] E. 5.32% >[removed] >[removed] [removed] < F. 5.83% 6 points  Question 17Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below.     Bond X Bond Y Face value \$1,000 \$1,000 Annual Coupon Payment \$120 \$130 Payment Frequency Semiannual Annual Years to maturity 15 15 Price \$950.39 ?                   What is the price of bond Y? >[removed] >[removed] [removed] < < A. \$1,007.15 >[removed] >[removed] [removed] B. \$925.88 >[removed] >[removed] [removed] < C. \$989.75 >[removed] >[removed] [removed] D. \$956.95 >[removed] >[removed] [removed] E. \$940.92 >[removed] >[removed] [removed] < F. \$973.44

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