Business and Finance Homework

Need finance homework help? Ask an Expert

Connect one-on-one with {0} who will answer your question

Customer Question

1. What would the future value...

1. What would the future value of $125 be after 8 years at 8.5% compound interest?

a. $205.83

b. $216.67

c. $228.07

d. $240.08

e. $252.08

2. Last year Mason Corp's earnings per share were $2.50, and its growth rate during the prior 5 years was 9.0% per year. If that growth rate were maintained, how many years would it take for Mason’s EPS to double?

a. 5.86

b. 6.52

c. 7.24

d. 8.04

e. 8.85

3. Your girlfriend just won the Florida lottery. She has the choice of $15,000,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is built into the annuity?

a. 2.79%

b. 3.10%

c. 3.44%

d. 3.79%

e. 4.17%

4. An investment costs $1,000 (CF at t = 0) and is expected to produce cash flows of $75 at the end of each of the next 5 years, then an additional lump sum payment of $1,000 at the end of the 5th year. What is the expected rate of return on this investment?

a. 6.77%

b. 7.13%

c. 7.50%

d. 7.88%

e. 8.27%

5. Credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18.00%, with interest paid monthly, what is the card's EFF%?

a. 18.58%

b. 19.56%

c. 20.54%

d. 21.57%

e. 22.65%

6. East Coast Bank offers to lend you $25,000 at a nominal rate of 7.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Midwest Bank also offers to lend you the $25,000, but it will charge an annual rate of 8.3%, with no interest due until the end of the year. What is the difference in the effective annual rates charged by the two banks?

a. 0.93%

b. 0.77%

c. 0.64%

d. 0.54%

e. 0.43%

7. The Morrissey Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price?

a. $923.22

b. $946.30

c. $969.96

d. $994.21

e. $1,019.06

8. Consider some bonds with one annual coupon payment of 7.25%. The bonds have a par value of $1,000, a current price of $1,125, and they will mature in 13 years. What is the yield to maturity on these bonds?

a. 5.56%

b 5.85%

c. 6.14%

d. 6.45%

e. 6.77%

9. Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

a $891.00

b. $913.27

c. $936.10

d. $959.51

e. $983.49

10. Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

a. $1,077.01

b. $1,104.62

c. $1,132.95

d. $1,162.00

e $1,191.79

11. Taussig Corp.'s bonds currently sell for $1,150. They have a 6.75% annual coupon rate and a 15-year maturity, but they can be called in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM?

a. 3.92%

b. 4.12%

c. 4.34%

d. 4.57%

e. 4.81%

12. In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows:

Long-term debt (bonds, at par) $10,000,000

Preferred stock 2,000,000

Common stock ($10 par) 10,000,000

Retained earnings 4,000,000

Total debt and equity $26,000,000

The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

a. $5,276,731

b $5,412,032

c. $5,547,332

d. $7,706,000

e. $7,898,650

13. Crockett Corporation's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for Crockett's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 1.25%, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) ? 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on 5-year bonds?

a. 1.40%

b 1.55%

c. 1.71%

d. 1.88%

e. 2.06%

14. J. Harper Inc.'s stock has a 50% chance of producing a 35% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is Harper's expected return?

a. 14.16%

b. 14.53%

c 14.90%

d. 15.27%

e. 15.65%

15. A stock has an expected return of 12.60%. Its beta is 1.49 and the risk-free rate is 5.00%. What is the market risk premium?

a. 5.10%

b. 5.23%

c. 5.36%

d. 5.49%

e. 5.63%

16. Yonan Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Yonan's beta remain unchanged. What is Yonan's new required return? (Hint: First calculate the beta, then find the required return.)

a. 14.03%

b. 14.38%

c. 14.74%

d. 15.10%

e. 15.48%

a. $205.83

b. $216.67

c. $228.07

d. $240.08

e. $252.08

2. Last year Mason Corp's earnings per share were $2.50, and its growth rate during the prior 5 years was 9.0% per year. If that growth rate were maintained, how many years would it take for Mason’s EPS to double?

a. 5.86

b. 6.52

c. 7.24

d. 8.04

e. 8.85

3. Your girlfriend just won the Florida lottery. She has the choice of $15,000,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is built into the annuity?

a. 2.79%

b. 3.10%

c. 3.44%

d. 3.79%

e. 4.17%

4. An investment costs $1,000 (CF at t = 0) and is expected to produce cash flows of $75 at the end of each of the next 5 years, then an additional lump sum payment of $1,000 at the end of the 5th year. What is the expected rate of return on this investment?

a. 6.77%

b. 7.13%

c. 7.50%

d. 7.88%

e. 8.27%

5. Credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18.00%, with interest paid monthly, what is the card's EFF%?

a. 18.58%

b. 19.56%

c. 20.54%

d. 21.57%

e. 22.65%

6. East Coast Bank offers to lend you $25,000 at a nominal rate of 7.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Midwest Bank also offers to lend you the $25,000, but it will charge an annual rate of 8.3%, with no interest due until the end of the year. What is the difference in the effective annual rates charged by the two banks?

a. 0.93%

b. 0.77%

c. 0.64%

d. 0.54%

e. 0.43%

7. The Morrissey Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price?

a. $923.22

b. $946.30

c. $969.96

d. $994.21

e. $1,019.06

8. Consider some bonds with one annual coupon payment of 7.25%. The bonds have a par value of $1,000, a current price of $1,125, and they will mature in 13 years. What is the yield to maturity on these bonds?

a. 5.56%

b 5.85%

c. 6.14%

d. 6.45%

e. 6.77%

9. Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

a $891.00

b. $913.27

c. $936.10

d. $959.51

e. $983.49

10. Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

a. $1,077.01

b. $1,104.62

c. $1,132.95

d. $1,162.00

e $1,191.79

11. Taussig Corp.'s bonds currently sell for $1,150. They have a 6.75% annual coupon rate and a 15-year maturity, but they can be called in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM?

a. 3.92%

b. 4.12%

c. 4.34%

d. 4.57%

e. 4.81%

12. In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows:

Long-term debt (bonds, at par) $10,000,000

Preferred stock 2,000,000

Common stock ($10 par) 10,000,000

Retained earnings 4,000,000

Total debt and equity $26,000,000

The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

a. $5,276,731

b $5,412,032

c. $5,547,332

d. $7,706,000

e. $7,898,650

13. Crockett Corporation's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for Crockett's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 1.25%, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) ? 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on 5-year bonds?

a. 1.40%

b 1.55%

c. 1.71%

d. 1.88%

e. 2.06%

14. J. Harper Inc.'s stock has a 50% chance of producing a 35% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is Harper's expected return?

a. 14.16%

b. 14.53%

c 14.90%

d. 15.27%

e. 15.65%

15. A stock has an expected return of 12.60%. Its beta is 1.49 and the risk-free rate is 5.00%. What is the market risk premium?

a. 5.10%

b. 5.23%

c. 5.36%

d. 5.49%

e. 5.63%

16. Yonan Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Yonan's beta remain unchanged. What is Yonan's new required return? (Hint: First calculate the beta, then find the required return.)

a. 14.03%

b. 14.38%

c. 14.74%

d. 15.10%

e. 15.48%

Show More

Show Less

Was this answer helpful?

Describe your issueThe assistant will guide you

Chat 1:1 with a business tutorLicensed Experts are available 24/7

100% satisfaction guaranteeGet all the answers you need

Related Business and Finance Homework Questions

Word document of 700–1,000 words with attached Excel Spreadsheet

Word document of 700–1,000 words with attached Excel Spreadsheet showing calculations After engaging in a dialogue with your colleagues on valuation, you will now be given an opportunity to apply prin… read more

Question 1:You have observed the following returns on ABC's

Question 1:You have observed the following returns on ABC's stocks over the last five years:3.6%, 8.1%, -9.2%, 10.7%, -3.6% What is the geometric average returns on the stock over this five-year perio… read more

Current Yield for Annual Payments1. Heath Foodss bonds

Current Yield for Annual Payments 1. Heath Foods's bonds have 11 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 8%. They pay interest annually and have a… read more

F.Naz F. Naz F. Naz F. Naz F. Naz F.Naz Note for all

F.Naz F. Naz F. Naz F. Naz F. Naz F.Naz Note for all answers: Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.3… read more

1-BCD's $1,000 par value bonds currently sell for $798.40.

1-BCD's $1,000 par value bonds currently sell for $798.40. The coupon rate is 10%, paid semi-annually. If the bonds have 5 years to maturity, what is the yield to maturity? Note: Enter your answer rou… read more

Question 1The 8 percent coupon bonds of the Peterson Co.

Question 1 The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _… read more

The objectives of this assignment are to determine the value

The objectives of this assignment are to determine the value of bonds paying annual and semiannual interest payments, and determine the yield to maturity of bonds paying annual and semiannual interest… read more

5-1 Bond Valuation with Annual Payments Jackson Corporations

5-1 Bond Valuation with Annual Payments Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8… read more

15. If the expected return on the market portfolio is 14%,

15. If the expected return on the market portfolio is 14%, if the risk-free rate is 4.5% and if the beta of Homton, Inc. stock is 1.44, what is the equilibrium expected rate of return on Homton's stoc… read more

1.A 30-year, $1,000 par value bond has a 9.5% annual payment

1.A 30-year, $1,000 par value bond has a 9.5% annual payment coupon. The bond currently sells for $875. If the yield to maturity remains at its current rate, what will the price be 9 years from now? 2… read more

1. (TCO A) Which of the following statements is CORRECT (Points

1. (TCO A) Which of the following statements is CORRECT? (Points : 10) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. It is generally easie… read more

1. Callaghan Motors bonds have 19 years remaining to maturity.

1. Callaghan Motors' bonds have 19 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 9.5%; and the yield to maturity is 11%. What is the… read more

Determine the value of bonds paying annual and semiannual interest

Determine the value of bonds paying annual and semiannual interest payments... The objectives of this assignment are to determine the value of bonds paying annual and semiannual interest payments, and… read more

The objectives of this assignment are to determine the value

The objectives of this assignment are to determine the value of bonds paying annual and semiannual interest payments, and determine the yield to maturity of bonds paying annual and semiannual interest… read more

1. The market allocates capital to companies based on

1. The market allocates capital to companies based on: (a)risk. (b) efficiency. (c)expected returns. (d)all of the above 2. Which of the following financial assets is likely to have the highest requir… read more

#1 Callaghan Motors bonds have 10 years remaining to

#1 Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 8.5%, and the yield to maturity is 9.5%. What is th… read more

1/Yield to maturity Alice Trang is planning to buy a six-year

1/Yield to maturity: Alice Trang is planning to buy a six-year bond that pays a coupon of 10 percent semiannually. Given the current price of $878.21, what is the yield to maturity on these bonds? a/1… read more

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.

JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.

Web sites like justanswer.com/legal

...leave nothing to chance.

...leave nothing to chance.

Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.

Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.

I will tell you that...the things you have to go through to be an Expert are quite rigorous.

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

Los Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

Hesperia, CA

I couldn't be more satisfied! This is the site I will always come to when I need a second opinion.

Kernersville, NC

Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around.

Woodstock, NY

Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know.

Elkton, Maryland

He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here.

Dallas, TX

< Previous | Next >

linda_us

Master's Degree

852 satisfied customers

A tutor for Business, Finance, Accounts and other related topics.

F. Naz

Bachelor's Degree

5,773 satisfied customers

Have completed B.COM and CA Finalist

516 satisfied customers

dasdasd

Bizhelp

Accountant

260 satisfied customers

BA degree and Certified Public Accountant

Mr. Gregory White

Master's Degree

215 satisfied customers

M.A., M.S. Education / Educational Administration

Brittany

Professional

30 satisfied customers

AA/Accounting BS/Business

SusanAthena

Master's Degree

13 satisfied customers

12 years experience consulting & management

< Previous | Next >

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.