2024 – Question 1 How much did you borrow for your house if your
Shady Rack Inc. – 2024
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?
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<<A. |
$249,235 |
>[removed]>[removed][removed] |
B. |
$218,080 |
>[removed]>[removed][removed] |
<C. |
$264,812 |
>[removed]>[removed][removed] |
D. |
<$202,503 |
>[removed]>[removed][removed] |
E. |
$233,658 |
>[removed]>[removed][removed] |
<F. |
$186,926 |
6 points
>question 2
Question 2
Shady 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 3
Sanaponic, 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.
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<<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 4
Your 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 5
Please 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 6
What 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 7
At what discount rate would you be indifferent between these two projects?
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<<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 8
A 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%.
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<<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 9
Riverhawk 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?
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<<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 10
You 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?
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<<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 11
Sales 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 12
Apple 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 13
The 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?
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<<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 14
The 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 15
Last 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 16
You 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 17
Bonds 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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