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					d   1.   The rate of return required by investors in the market for owning a bond is called the:
    a.   Coupon.
    b.   Face value.
    c.   Maturity.
    d.   Yield to maturity.
    e.   Coupon rate.

a   2.   Which of the following statements regarding bond pricing is true?
    a.   The lower the discount rate, the more valuable the coupon payments are today.
    b.   Bonds with high coupon payments are generally (all else the same) more sensitive to
         changes in interest rates than bonds with lower coupon payments.
    c.   When market interest rates rise, bond prices will also rise, all else the same.
    d.   Bonds with short maturities are generally (all else the same) more sensitive to changes
         in interest rates than bonds with longer maturities.
    e.   All else the same, bonds with larger coupon payments will have a lower price today.


d   3.   What is the market value of a bond that will pay a total of fifty semiannual coupons of
         $80 each over the remainder of its life? Assume the bond has a $1,000 face value and a
         12% yield to maturity.
    a.   $ 734.86
    b.   $ 942.26
    c.   $1,135.90
    d.   $1,315.24
    e.   $1,545.62

c   4.   A stock’s next expected dividend divided by the current stock price is the:
    a.   Current yield.
    b.   Total yield.
    c.   Dividend yield.
    d.   Capital gains yield.
    e.   Earnings yield.


b   5.   What would you pay for a share of ABC Corporation stock today if the next dividend
         will be $3 per share, your required return on equity investments is 15%, and the stock is
         expected to be worth $90 one year from now?
    a.   $78.26
    b.   $80.87
    c.   $82.56
    d.   $90.00
    e.   $98.12


b   6.   Calculate the NPV of the following project using a discount rate of 10%:
         Yr 0 = –$800; Yr 1 = –$80; Yr 2 = $100; Yr 3 = $300; Yr 4 = $500; Yr 5 = $500
    a.   $ 8.04
    b.   $ 87.28
    c.   $208.04
    d.   $459.17
    e.   $887.28

				
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