Quiz Paper A 1, Quiz Paper B 6
Which one of the following measures a bond’s sensitivity to changes in market
a. yield to call
b. yield to market
e. target date valuation
JJ Industries will pay a regular dividend of $2.40 per share for each of the next four
years. At the end of the four years, the company will also pay out a liquidating
dividend, and the company will cease operations. If the current share price is $50
and the discount rate is 10%, what must the liquidating dividend be?
Quiz Paper A 3, Quiz Paper B 8
An 8.5 percent coupon bond pays interest semiannually and has 10.5 years to
maturity. The bond has a face value of $1,000 and a market value of $878.50. What
is the yield to maturity?
a. 5.16 percent
b. 8.37 percent
c. 8.78 percent
d. 10.43 percent
e. 11.21 percent
Quiz Paper A 4, Quiz Paper B 9
LKD Co. has 10 percent coupon bonds with a YTM of 8.6 percent. The current
yield on these bonds is 9.2 percent. How many years do these bonds have left until
they mature? (Face value is $1,000 and coupons are paid semiannually.)
a. 18.52 years
b. 18.14 years
c. 9.26 years
d. 9.07 years
Quiz Paper A 5, Quiz Paper B 10
Atlantis Seafood Company stock currently sells for $70 per share. The company is
expected to pay a dividend of $4.35 per share next year, and analysts project that
dividends should increase at 4.5% per year for the indefinite future. What must the
relevant discount rate be for Atlantis stock?
Quiz Paper A 6, Quiz Paper B 16
Landon Air Corporation reported net income of $25 million for last year.
Depreciation expense totaled $10 million and capital expenditures came to $3
million. Free cash flow is expected to grow at a rate of 3% for the foreseeable future.
Landon Air faces a 35% tax rate and has $100 million (market value) in debt
outstanding. If required return on Landon Air’s assets is 10.65%, what is the current
total value of Landon Air’s equity (in millions)?
Quiz Paper A 7, Quiz Paper B 17
Which one of the following rates is used by brokerage firms as the basis for
determining margin loan rates?
b. Fed funds
e. call money
Quiz Paper A 8, Quiz Paper B 18
An increase in the retention ratio will:
a. increase the payout ratio.
b. decrease a firm’s sustainable rate of growth.
c. not affect the value of a firm’s stock.
d. decrease the value of a firm’s stock.
e. increase the value of a firm’s stock.
Quiz Paper A 9, Quiz Paper B 19
Which one of the following orders is frequently used as a means to limit losses
resulting from a short sale?
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