id stringlengths 3 7 | question stringlengths 28 4.78k | answer stringlengths 1 785 | answer_type stringclasses 11 values | category stringclasses 1 value | difficulty stringclasses 3 values | __index_level_0__ int64 1 229k |
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1078284 | Assume that the real risk-free rate, r*, is 3% and that inflation is expected to be 8% in Year 1, 5% in Year 2, and 4% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. If 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRPs) on the two notes; that is, what is MRP5 minus MRP2? | 1.5% | Percentage | Finance | University | 88,665 |
1919204 | Merton Enterprises has bonds on the market making annual payments, with 12 years to maturity, and selling for $963. At this price, the bonds yield 7.5 percent. What must the coupon rate be on Merton? | 7.02% | Percentage | Finance | University | 112,008 |
18750 | Draw the time line of a fixed-payment auto loan worth $10,000, to be paid in monthly installments over 3 years, with an APR (annualized percentage rate) of 8%, which means a monthly payment of 332.14. The time line should be from the perspective of a borrower. Indicate clearly the arrows for payments made and payments received. | Month 0 1 2 3 4 5 ... 34 35 36
CF +$10,000 -$332.14 -$332.14 -$332.14 -$332.14 -$332.14 ... -$332.14 -$332.14 -$332.14 | Other | Finance | University | 5,510 |
1885044 | You are considering three different bonds for your portfolio.
Each bond has a 10-year maturity and a yield to maturity of 10%.
Bond X has an 12% annual coupon, Bond Y has a 10% annual coupon, and Bond Z has a 8% annual coupon.
Which of the following statements is CORRECT?
a. Bond X has the greatest reinvestment rate risk.
b. If market interest rates decline, all of the bonds will have an increase in price, and Bond X will have the largest percentage increase in price.
c. If market interest rates remain at 10%, Bond Z's price will be 10% higher one year from today.
d. If market interest rates increase, Bond Z's price will increase, Bond X's price will decline, and Bond Y's price will remain the same. e. If the bonds' market interest rates remain at 10%, Bond X's price will be lower one year from now than it is today. | a | Multiple Choice | Finance | University | 111,502 |
105226 | Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a $4 year-end dividend. The firm is in the 30% tax bracket. | 7.0% | Percentage | Finance | University | 77,601 |
1221371 | Today you invested $32,600 in an investment that pays 5% and will mature in 4 years. Once the investment matures, you will reinvest your funds for another 5 years in another investment that pays 7%. What will the value of your investment be after 9 years? | $55,576.81 | Float | Finance | Senior High School | 51,409 |
585818 | A bond currently sells for $1,110, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 25 basis points, the price of the bond falls to $1,065. What is the duration of this bond? | 16.2 | Float | Finance | University | 49,000 |
1910066 | ABC Inc. recently issued $1,000 par bonds at a 5.25% coupon rate. The bonds have 15 years to maturity and current price of the bond is $850. If the call price is $1,050 and the bond can be called in 10 years, what is the yield to call? Assume semi-annual compounding. | 7.63% | Percentage | Finance | University | 141,467 |
1034797 | You are looking at investing in an annual coupon bond with {eq}8
{/eq} years to maturity, a face value of {eq}\$1000
{/eq}, a yield to maturity of {eq}8.5\ \%,
{/eq} and a price of {eq}\$1098.61
{/eq}. What is the annual coupon of the bond? | $101.52 | Float | Finance | University | 109,604 |
330154 | A call option is currently selling for $3.10. It has a strike price of $90 and three months to maturity. The current stock price is $92, and the risk-free rate is 2.7 percent. The stock will pay a dividend of $1.65 in two months.
What is the price of a put option with the same exercise price? | $2.14 | Float | Finance | University | 104,306 |
1412999 | 1. Interest expense on a loan denominated in another currency is converted at: A. The forward rate for delivery when the interest must be paid B. The spot rate when the loan was made C. The spot rate when the interest is accrued D. The average spot rate for the period the interest covers | C | Multiple Choice | Finance | University | 64,427 |
641767 | If you were offered $7,177.50 9 years from now in return for an investment of $1,500 currently, what annual rate of interest would you earn if you took the offer? | 19% | Percentage | Finance | Senior High School | 9,585 |
1701312 | A company just paid a dividend of $3.20 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a 15 percent return on the stock for the first three years, a 13 percent return for the next three years, and an 11 percent return thereafter.
What is the current share price? Please provide a basic explanation. | 48.88 | Float | Finance | University | 91 |
1235710 | Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.3088 = $1.00 and the exchange rate between the U.S. dollar and the euro is $1.00 = 1.1251 euros. What is the cross-rate of euros to Swiss francs (Euro/SF)? Enter your answer rounded off to FOUR decimal points. | 0.8596 | Float | Finance | University | 134,005 |
509086 | An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 10%. What is the proportion of the optimal risky portfolio that should be invested in stock A? | -7.69% | Percentage | Finance | University | 36,080 |
1380472 | Project K costs $60,728.66, its expected cash inflows are $13,000 per year for 9 years, and its WACC is 11%.
What is the project's IRR? | 15.60% | Percentage | Finance | University | 207,232 |
232332 | Essary Enterprises has bonds on the market making annual payments, with seven years to maturity, a par value of $1,000, and selling for $986. At this price, the bonds yield 7.8 percent. What must the coupon rate be on the bonds? | 7.5% | Percentage | Finance | University | 185,105 |
1299255 | A deep discount bond is expected to grow from $75,325 to $150,000 over 10 years. What is the yield to maturity on this instrument? | 7.13% | Percentage | Finance | University | 169,577 |
586158 | A Chrysler bond was listed in the Wall Street Journal on May 31, 1995 as:
10.95% coupon rate
2017 maturity
9.8% current yield, i.e., the annual rate of the return required by investors
What is this bond's intrinsic value? | 111.73 | Float | Finance | University | 220,255 |
597551 | Irene purchased a $1,000 par 5.8% convertible bond 10 years ago for $1,050. Three years ago, Irene exercised the conversion option and traded the bond for 25 shares of preferred stock. At the time of the conversion, the preferred stock had a market value of $50 per share. The price of the preferred stock has risen to $55 per share, and Irene is considering selling the stock.
What is the cost basis for the disposal of the preferred stock shares?
a. $1,250
b. $1.375
c. $1,000
d. $1,050
e. $1,150 | d | Multiple Choice | Finance | Senior High School | 169,929 |
77715 | Given the following information:
Percent of capital structure:
Preferred stock 20%
Common equity 70%
Debt 10%
Additional information:
Corporate tax rate 34%
Dividend, preferred $5.00
Dividend, expected common $5.50
Price, preferred $101.00
Growth rate 4%
Bond yield 5%
Flotation cost, preferred $5.20
Price, common $74.00
Calculate the weighted average cost of capital for Digital Processing Inc. | 9.32% | Percentage | Finance | University | 221,353 |
1932448 | One dollar invested in a portfolio of long-term U.S. government bonds in 1900 would have grown in nominal value by the end of year 2011 to:
A. $719
B. $66
C. $74
D. $245 | D | Multiple Choice | Finance | University | 205,724 |
589950 | Suppose that B2B, Inc., has a capital structure of 37 percent equity, 18 percent preferred stock, and 45 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 13.5 percent, 9.0 percent, and 8.5 percent, respectively. What is B2B's WACC if the firm faces an average tax rate of 30 percent? (Round your answer to 2 decimal places.) | 9.29% | Percentage | Finance | University | 10,133 |
232082 | Suppose that an investor purchased 100 shares of IBM stock at a price of $100 on December 31, 2012. During the year 2013, IBM paid dividends of $2.00 per share, and at the end of the year, the investor sold the stock at a price of $115.
If the tax rate was 15% on dividends and capital gains, what was the after-tax real return? | 14.45% | Percentage | Finance | University | 148,768 |
125041 | What is the present value of $12,350 to be received 4 years from today if the discount rate is 5 percent? | $10,160.43 | Float | Finance | Senior High School | 52,181 |
744304 | Suppose a manager wants to borrow $50 million of a Treasury security that it plans to purchase and hold for 20 days. The manager can enter into a reverse repo agreement with a dealer firm that would provide financing at a 4.2% repo rate and a 2% margin requirement.
What is the dollar interest cost that the manager will have to pay for the borrowed funds? | $114,379.80 | Float | Finance | University | 146,049 |
1342789 | One year ago, the Jenkins Family Fun Center deposited $5,000 in an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $6,800 to this account. They plan on making a final deposit of $9,000 to the account next year.
How much will be available when they are ready to buy the equipment, assuming they earn a 8% rate of return?
A.$26,145.01
B.$26,891.15
C.$26,892.29
D.$27,935.37
E.$25,320.92 | D | Multiple Choice | Finance | University | 183,658 |
1138812 | Wyland Co. wants to issue new 15-year bonds for some much-needed expansion projects. The company currently has 6 percent coupon bonds on the market that sell for $1,030, make semiannual payments, and mature in 15 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? | 5.71% | Percentage | Finance | University | 50,238 |
2017766 | Gamma Ltd is not expecting to pay dividends for three years, at the end of year four, a dividend of $2.45 is planned and dividends are expected to be constant forever after that. The required rate of return for Gamma Ltd equity is {eq}J_4
{/eq} = 12.25% pa. What is the expected price (cum-dividend) of Gamma Ltd's shares at the beginning of year eight? Explain. | $20 | Integer | Finance | University | 148,654 |
860180 | The market consensus is that Analog Electronic Corporation has an ROE=9% and a beta of 1.80. It plans to maintain indefinitely its traditional plowback ratio of 2/4. This year's earnings were $3.2 per share. The annual divided was just paid. The consensus estimate of the coming year's market return is 14%, and T- bills currently ofer a 5% return. Calculate the present value of growth opportunities (PVGO) | -$5.76 | Float | Finance | University | 21,359 |
1125974 | You make a series of quarterly deposits every quarter starting at the end Quarter 1 and ending at the end of Quarter 20. the first deposit is $1500, and each deposit increases by $200 each Quarter. The nominal annual interest rate is 10% and is compounded continuously. What is the Future Value of these series of deposits at the end of Quarter 20? | $82,885.37 | Float | Finance | University | 127,603 |
1332186 | A five-year project has projected net cash flow of $15,000, $25,000, $30,000, $20,000 and $15,000 in the next 5 years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. | $12,895 | Float | Finance | University | 148,834 |
1063947 | First and Ten Corporation's stock returns have a covariance with the market portfolio of .0506. The standard deviation of the returns on the market portfolio is 23 percent and the expected market risk premium is 6.5 percent. The company has bonds outstanding with a total market value of $56.8 million and a yield to maturity of 6.8 percent. The company also has 6 million shares of common stock outstanding, each setting for $33. The company's CEO considers the firm's current debt-equity ratio optimal. The corporate tax rate is 23 percent and Treasury bills currently yield 4.4 percent. The company is considering the purchase of additional equipment that would cost $58 million. The expected unlevered cash flows from the equipment are $19.1 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm.
Calculate the NPV of the project. | 15.51 million | Float | Finance | University | 20,460 |
1816564 | PK Software has 8 percent coupon bonds on the market with 23 years to maturity. The bonds make semiannual payments and currently sell for 109.25 percent of par. What is the effective annual yield? | 7.31% | Percentage | Finance | University | 78,820 |
2071090 | An investment of $150,000 is expected to generate an after-tax cash flow of $100,000 in one year and another $120,000 in two years. The cost of capital is 10%. What is the internal rate of return? | 28.79% | Percentage | Finance | University | 136,364 |
1823821 | South Penn Trucking is financing a new truck with a loan of $10,000 to be repaid in 5 annual end-of-year installments of $2,504.56. What annual interest rate is the company paying? | 8% | Percentage | Finance | University | 61,347 |
619542 | You would like to purchase the stock of ABC Corporation. Based on your forecast, the company will not pay dividends at the end of year one, year two, and year three, as it is in the start-up stage. You expect that ABC Corporation will start paying dividends at the end of year four, in particular, the estimated dividends are:
End of year 4:
$0.10 per share
End of year 5:
$0.20 per share
End of year 6:
$0.25 per share
The dividends are expected to grow at a constant rate of 6% per year thereafter. Given a required rate of return of 15% per year, what is the value of a share of ABC Corporation's stock today? | $1.5357 | Float | Finance | University | 149,167 |
964782 | The City of Vernon, TX is considering installing red light cameras at high-risk intersections to reduce traffic accidents. The life of the cameras would be 10 years. The cost of maintaining the cameras is $16,000 the first year, and then increasing every year by a constant amount of $2,500. Public benefits are estimated at $100,000 per year.
What would the MAXIMUM initial investment cost of the cameras (its present worth at t = 0) in order for this project to be justified, using a rate of 10%? | $458,962 | Float | Finance | University | 82,708 |
1461453 | You own a lot in Florida that is currently unused. Similar lots have recently sold for $1.2 million. Over the past five years, the price of land in the area has increased 10 percent per year, with an annual standard deviation of 25 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,300,000. The risk-free rate of interest is 4 percent per year, compounded continuously. How much should you charge for the option? (Round your answer to the nearest $1,000.)
A. $52,000
B. $58,000
C. $63,000
D. $72,000
E. $99,000 | E | Multiple Choice | Finance | University | 60,637 |
1305789 | Where stocks sre traded can be called any of these EXCEPT | A | Multiple Choice | Finance | Senior High School | 148,312 |
1883215 | The amount of income available to the owner after the mortgage lender has been paid its portion of the net operating income is called:
a) pre-tax cash flow.
b) equity dividend.
c) gravy.
d) both a and b. | b | Multiple Choice | Finance | University | 164,725 |
914444 | Calculate the future value of $500 invested for 8 years at an interest rate of 9% compounded semiannually. | $1,011.19 | Float | Finance | Senior High School | 83,635 |
1279307 | Your older sister deposited $2,500 today at 7.5 percent interest for 5 years. You would like to have just as much money at the end of the next 5 years as your sister will have. However, you can only earn 7 percent interest. How much more money must you deposit today than your sister did if you are to have the same amount at the end of the 5 years? | $58.95 | Float | Finance | Senior High School | 188,150 |
99985 | What is the present value of $2,000 to be received at the end of 12 years with interest rate at 12%, compounded quarterly?
a. $1,705.64
b. $484
c. $1061.27
d. $500
e. none of the above | b | Multiple Choice | Finance | University | 75,453 |
1524081 | Crowe Company has acquired a building with a loan that requires payments of $16,000 every six months for 3 years. The annual interest rate on the loan is 8%. What is the present value of the building? | $83,873.60 | Float | Finance | University | 90,818 |
1375956 | M Company recently signed a lease for a new office building, for a lease period of 12 years. Under the lease agreement, a security deposit of $14,850 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 5% per year. What amount will the company receive at the time the lease expires? | $26,668.47 | Float | Finance | Senior High School | 59,292 |
1380447 | Say you bought a house for $332,000 with 10% down, and financed it for a 30-year term. If the maximum payment that you can make on this loan is $1,500, what is the highest APR loan that you should be looking for? | 4.42% | Percentage | Finance | Senior High School | 204,517 |
689645 | Lawrence Industries' most recent annual dividend was $1.13 per share (D0 = $1.13), and the firm's required return is 10%.
Find the market value of Lawrence's shares when dividends are expected to grow at 8% annually for 3 years, followed by a 6% constant annual growth rate in years 4 to infinity. | $29.50 | Float | Finance | University | 219,419 |
1819480 | The Hand-to-Mouth Company needs a $10,000 loan for the next 30 days. It is trying to decide which of three alternatives to use:
Alternative A: Forgo the discount on its trade credit agreement that offers terms of 2/10, net 30.
Alternative B: Borrow the money from Bank A, which has offered to lend the firm $10,000 for 30 days at an APR of 12%. The bank will require a (no-interest) compensating balance of 5% of the face value of the loan and will charge a $100 loan origination fee, which means Hand-to-Mouth must borrow even more than the $10,000.
Alternative C: Borrow the money from Bank B, which has offered to lend the firm $10,000 for 30 days at an APR of 15%. The loan has a 1% loan origination fee.
Which alternative is the cheapest source of financing for Hand-to-Mouth? | B | Multiple Choice | Finance | University | 79,024 |
354917 | Robert Hitchcock is 40 years old today, and he wishes to accumulate $500,000 by the time he is 65 so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his fortieth through his sixty-fourth birthdays. What annual deposit must Robert make if the fund will earn 12% interest compounded annually? | $3,749.99 | Float | Finance | University | 114,382 |
908208 | Badger Corp. has an issue of 6% bonds outstanding with 6 months left to maturity. The bonds are currently priced at $1007 and pay interest semiannually. The firm's marginal tax rate is 40%. The estimated risk premium between the company's stock and bond returns is 6%. The firm expects to maintain a capital structure with 40% debt and 60% equity going forward. What is the company's WACC? | 7.43% | Percentage | Finance | University | 73,309 |
476508 | A couple has decided to purchase a $370,000 house using a downpayment of $21,000. They can amortize the balance at 12% over 30 years. What is their monthly payment? | $3,589.86 | Float | Finance | Senior High School | 28,070 |
979046 | You plan to invest $5,000 at the end of each of the next 10 years in an account that has a 9 percent nominal rate with interest compounded daily. How much will be in your account at the end of the 20 years? | $190,674 | Float | Finance | University | 87,713 |
1216608 | Fenway Athletic Club is going to offer its members preferred stock with a par value of $100 and an annual dividend rate of 7%. If a member wants the following returns, what price should he or she be willing to pay? | Value = $7/r | Expression | Finance | Senior High School | 94,445 |
650987 | A Xerox DocuColor photocopier costing 44,000 is paid off in 60 monthly installments at 7.3% APR. After three years the company wishes to sell photocopier. What is the minimum price for which they can sell the copier so they can cover the cost of the balance remaining on the loan? | 19539.51 | Float | Finance | Senior High School | 19,018 |
1998531 | Braxton Enterprises currently has a debt outstanding of $50 million and an interest rate of 7%. Braxton plans to reduce its debt by repaying $10 million in principal at the end of each year for the next five years. If Braxton's marginal corporate tax rate is 30%, what is the interest tax shield from Braxton's debt in each of the next five? years? (Round to three decimal places.) | Year 1: $1,050,000
Year 2: $840,000
Year 3: $630,000
Year 4: $420,000
Year 5: $210,000 | List | Finance | University | 45,995 |
264779 | The current stock price for a company is $47 per share, and there are 3 million shares outstanding. The beta for this firm's stock is 0.8, the risk-free rate is 4.8, and the expected market risk premium is 6.5%. This firm also has 200,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 8%, 11 years to maturity, a face value of $1,000, and an annual yield to maturity of 9%. If the corporate tax rate is 34%, what is the Weighted Average Cost of Capital (WACC) for this firm? | 7.62% | Percentage | Finance | University | 102,251 |
91705 | What is the current cash value of $2,800 annual payments for 8 years with money worth 6.75% compounded annually? | $16,882.83636 | Float | Finance | University | 122,093 |
19146 | Compute the Discounted Payback statistic for Project X, and recommend whether the firm should accept or reject the project with the cash flows shown below, if the appropriate cost of capital is 12 percent, and the maximum allowable discounted payback is 3 years.
Cash flow:
Time 0: -980
Time 1: 380
Time 2: 600
Time 3: 520
Time 4: 420
Time 5: 270 | 2.44 years, accept | Float | Finance | University | 122,108 |
557006 | Calculate the weighted average cost of capital for the following firm: it has $275,000 in debt, $650,000 in common stock, and $115,000 in preferred stock. It has a 5.75% cost of debt, 9.75% cost of common stock, 12% cost of preferred stock, and a 25% tax rate. | 8.58% | Percentage | Finance | University | 58,223 |
320512 | An investment has infinite life. Its annual cost is $1400 for the first five years and $1600 per year thereafter. If the interest is 6% per annum, the present worth of the total amount invested is most nearly:
$10,000
$30,000
$50,000
$20,000 | B | Multiple Choice | Finance | University | 95,499 |
508196 | A bicycle manufacturer currently produces 309,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $202,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $37,000 of inventory and another working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $15,150.
If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier? | $317,586.75 | Float | Finance | University | 183,707 |
778644 | Richards Inc. is considering a project that has the following cash flow data: t = 0 has -$1,400, and the next four years from t = 1 through t = 4 has cash inflows of $425 each year. What is the project's IRR?
A. 6.46%
B. 5.98%
C. 16.88%
D. 8.25%
E. 7.71% | D | Multiple Choice | Finance | University | 173,036 |
880435 | Bourdon Software has 10.4% coupon bonds on the market with 16 years to maturity. The bonds make semiannual payments and currently sell for 108% of par. Current yield is 9.63% and effective annual yield is 9.7%. What is the YTM? | 9.42% | Percentage | Finance | University | 121,070 |
808348 | Kingston, Inc. management is considering purchasing a new machine at a cost of $4,267,221. They expect this equipment to produce cash flows of $837,693, $881,231, $882,233, $965,443, $1,142,366, and $1,289,435 over the next six years. If the appropriate discount rate is 15 per cent, then what is the NPV of this investment? | -$614,683 | Float | Finance | University | 20,040 |
877039 | If a bank invested $57 million in a two-year asset paying 10% interest per year and simultaneously issued a $57 million one-year liability paying 7% interest per year, what would be the impact on the bank's net interest income if, at the end of the first year, all interest rates increased by 2 percentage point? (Input the amount as a positive value. Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) | 0 | Float | Finance | University | 221,585 |
801456 | A currency trader observes the following quotes in the spot market: 1 U.S. dollar = 10.875 Mexican pesos, 1 British pound = 6.205 Danish krone, 1 British pound = 1.65 U.S. dollars. Given this information, how many Mexican pesos can be purchased for 1 Danish krone? | 2.8918 Mexican Pesos | Float | Finance | Senior High School | 64,588 |
784649 | High Flyer, Inc., wishes to maintain a growth rate of 13.25 percent per year and a debt-equity ratio of .35. The profit margin is 4.9 percent, and total asset turnover is constant at 1.19. What is the dividend payout ratio? | -68.36% | Percentage | Finance | University | 48,935 |
1202895 | An investor wants to buy land that will be worth $4,000 in 15 years. If the value of land increases at 7% each year, how much is the land worth today? | $1,449.78 | Float | Finance | Senior High School | 200,525 |
238375 | The Brambles industry is considering a major expansion. The initial outlay associated with the expansion would be $4,500,000 and the project would generate incremental cash flows of $750,000 per year for the first four years and $500,000 per year for the remaining six years of the project's life. The appropriate required rate of return is 12% and the project is evaluated on a pre-tax basis.
Calculate the profitability index. | 0.208 | Float | Finance | University | 220,258 |
1106174 | IBM has a beta of 0.9 and an expected return of 10%. The risk free rate is 2% and the market risk premium is 10%. IBM is valued because the CAPM implies its return should be:
(A) under; 11.0%
(B) under; 9.2%
(C) over; 11.0%
(D) over; 9.2%
(E) None of the above | C | Multiple Choice | Finance | University | 163,563 |
160086 | What is the future value of an annual deposit of $230 earning 6 percent for 15 years? | $5,353.47 | Float | Finance | Senior High School | 43,988 |
477036 | Computing the Issue Price of Bonds See the Present and Future Value Tables from the Appendix for help in solving this item. Rate from table is .21455 Compute the issue price of each of the following bonds. Round your answers to the nearest dollar.
a. $10,000,000 face value, zero coupon bonds due in 20 years, priced on the market to yield 8% compounded semiannually. | $2,145,500 | Integer | Finance | University | 117,108 |
2039047 | Assume that you want to accumulate {eq}\$20,000
{/eq} as a down payment on a home. You believe that you can save {eq}\$2,000
{/eq} per semiannual period, and your bank will pay interest of {eq}6 \%
{/eq} per year, or {eq}3 \%
{/eq} per semiannual period. How long will it take you to accumulate the desired amount? | 8.88 semiannual periods | Float | Finance | University | 216,899 |
1478234 | Suppose the September CBOT Treasury bond futures contract (6% coupon rate, semiannual payment, and 20 years to maturity) has a quoted price of 96-09. What is the implied annual interest rate inherent in this futures contract? (Assume a $1,000 par value, and round to the nearest whole dollar.)
a. 6.33%
b. 6.75%
c. 7.00%
d. 7.15%
e. 7.62% | a | Multiple Choice | Finance | University | 155,763 |
1319565 | A drug store is looking into the possibility of installing a 24/7 automated prescription refill system to increase its projected revenues by $20,000 per year over the next five years. Annual expenses to maintain the system are expected to be $5,000. The system will cost $50,000 and will have no market value at the end of the five-year study period.
Calculate the IRR for this investment. | 15.24% | Percentage | Finance | University | 93,191 |
1778055 | Ana-rated municipal bonds are carrying a market yield today of 5.25 percent, while Ana-rated corporate bonds have current market yields of 1 percent. What is the breakeven tax rate that would make a taxable investor indifferent between those two types of bonds? | T = 1 - 5.25%/I | Expression | Finance | Senior High School | 81,568 |
2060140 | What is the value today of $700 paid every six months forever, with the first $700 payment occurring five years from today? The interest rate is 8% per annum, compounded half-yearly.
a. $4,377.18
b. $11,822.37
c. $12,295.27
d. $17,500.00 | c | Multiple Choice | Finance | University | 71,310 |
1070555 | Selma and Troy are planning to take a second honeymoon in 2 years. They estimate that the cost will be roughly $7,985.74. They plan to make monthly payments of $275 and expect to receive 10{eq}\%
{/eq} annual interest on their savings. Given this information:
What must their monthly savings payments be in order to reach their goal if the annual interest rate drops 4.5{eq}\%
{/eq} below the should be rate in order to make their goal? | $315.54 | Float | Finance | Senior High School | 184,077 |
404971 | A company pays a constant $8.25 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 11.2 percent, what is the current share price? | 55 | Integer | Finance | University | 152,219 |
1483642 | NPV Project K costs $55,000, its expected cash inflows are $11,000 per year for 9 years, and its WACC is 9%.
What is the project's NPV?
Round your answer to the nearest cent.
$ | 10947.72 | Float | Finance | University | 186,803 |
245266 | The security market line defines expected returns for diversified portfolios.
a. True
b. False | a | Multiple Choice | Finance | University | 146,055 |
1568144 | Ken Francis is offered the possibility of investing $6,438 today and in return to receive $14,500 after 12 years. What is the annual rate of interest for this investment? | 7% | Percentage | Finance | Senior High School | 215,217 |
1424186 | A previously issued A2, 15-year industrial bond provides a return that's 75% higher than the prime interest rate of 11%. A previously issued A2 public utility bonds provide a yield of three-fourths of a percentage point higher than the previously issued A2 industrial bonds of equal quality.
Finally, new issues of A2 public utility bonds pay three-fourths of a percentage point more than the previously issued A2 public utility bonds.
What is the interest rate on a newly issued A2 public utility bond? (Write the answer as a percent rounded to 3 decimal places.) | 21.5% | Percentage | Finance | Senior High School | 12,271 |
2021504 | One More Time Software has 6.6 percent coupon bonds on the market with 16 years to maturity. The bonds make semiannual payments and currently sell for 104 percent of par. What is the yield to maturity on the bonds? | 6.22% | Percentage | Finance | University | 139,167 |
1398410 | Suppose you want to have $5,000 saved at the end of 5 years. The bank will pay 2% interest on your money.
How much would you have to deposit today to have the $5,000 for 5 years? | $4,528.65 | Float | Finance | Senior High School | 219,485 |
1332065 | You want to accumulate $1 minion by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 8% interest, compounded annually, you expect to get annual raises of 3%, which will offset inflation, and you will let the amount you deposit each year also grow by 3% (i.e., your second deposit to be 3% greater than your first, the third will be 3% greater than the second, etc.)
How much must your first deposit be if you are to meet your goal? | $9,736.96 | Float | Finance | University | 65,903 |
554991 | Gilliland Motor, Inc., paid a $4.35 dividend last year. If Gilliland's return on equity is 29 percent, and its retention rate is 36 percent, what is the value of the common stock if the investors require a rate of return of16 percent? | $86.40 | Float | Finance | University | 28,449 |
1163264 | What real rate of return is earned by a one-year investor in a bond that was purchased for $1,000, has a coupon rate of 8%, and was sold for $960 when the inflation rate was 6%? | -1.89% | Percentage | Finance | Senior High School | 91,166 |
1674165 | A company's 6% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $515.16. The company's marginal tax rate is 40% What is the firm's component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the simple rate, not the effective annual rate, EAR.) | 7.2% | Percentage | Finance | University | 150,096 |
1748583 | Calculate the future value of $800 in 7 years if the interest rate is 8% compounded monthly. | $1,397.94 | Float | Finance | Senior High School | 130,231 |
122093 | Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $15,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,000 and $12,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $5,200 at the end of each of the next 4 years. Each project has a WACC of 9.00%. What is the equivalent annual annuity of the most profitable project? | 569.97 | Float | Finance | University | 159,672 |
646793 | Grill Works and More has 7% preferred stock outstanding that is currently selling for $49 a share. The market rate of return is 14% and the firm's tax rate is 37%. What is the firm's cost of preferred stock? | 14.29% or 0.1429 | Percentage | Finance | University | 179,280 |
1222103 | The Besington glass company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 29 basis points (0.29 percent) over an index based on LIBOR. In addition the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.18 percent and a min of 1.73 percent. Calculate the rate of interest for weeks 2 through 10. Week/LIBOR: Week 1/1.96%, Week 2/1.65%, Week 3/1.46%, Week 4/1.36%, Week 5/1.65%, Week 6/1.67%, Week 7/1.75%, Week 8/1.88%, Week 9/1.89%. | Week 2: 2.18%, Week 3: 1.94%, Week 4: 1.75%, Week 5: 1.73%, Week 6: 1.94%, Week 7: 1.96%, Week 8: 2.04%, Week 9: 2.17%, Week 10: 2.18% | List | Finance | University | 48,384 |
524331 | Carol has been investing $5,000 in her 401(k) plan at the end of each year for the past 10 years in an equity mutual fund. How much is the fund worth assuming she has earned 15% compounded annually on her investment? | 101,518.59 | Float | Finance | Senior High School | 176,821 |
487992 | Calculate the present value of a $1,000 discount bond with five years to maturity if the yield to maturity is 6%. | $747.26 | Float | Finance | University | 223,998 |
1269772 | The manager of Gloria's Boutique has approved Carla's application for 24 months of credit with maximum monthly payments of {eq}\$70 {/eq}. If the APR is 14.2 percent, what is the maximum initial purchase that Carla can buy on credit?
A) {eq}\$1,300.00 {/eq}.
B) {eq}\$1,006.90 {/eq}.
C) {eq}\$1,228.46 {/eq}.
D) {eq}\$1,455.08 {/eq}.
E) {eq}\$1,184.75 {/eq}. | D | Multiple Choice | Finance | University | 218,605 |
175059 | XYZ has an outstanding bond. It's a 5% semiannual coupon bond maturing in 5 years with a par value of $100 and is trading at $95. The income tax rate is 25%. Calculate the after-tax cost of debt for XYZ. | 4.62% | Percentage | Finance | University | 13,249 |
70872 | An undeveloped piece of property can be developed for $60,000 in one year. At that time, it will either be worth $220,000 or $40,000. The interest rate is 5%. If the property cannot be developed for a profit in the down economy, the property can be sold for $5000. A similar property that is developed now is valued at $190,000. What should be the current value of the undeveloped land? | $92,077 | Float | Finance | University | 111,780 |
155391 | Michael Carter is expecting an inheritance of $1.25 million in four years. If he had the money today, he could earn interest at an annual rate of 7.35 percent. What is the present value of this inheritance? | $941,243.13 | Float | Finance | University | 128,498 |
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