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# Finance 300 Midterm Study Guide Finance 300

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This 5 page Study Guide was uploaded by Danielle Grek on Tuesday March 24, 2015. The Study Guide belongs to Finance 300 at Arizona State University taught by in Spring2015. Since its upload, it has received 219 views.

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Date Created: 03/24/15

Finance 300 Midterm Study Guide 1 During an economic expansion we would expect A interest rates to remain the same B interest rates to decrease C the price of money to decrease D interest rates to increase 2 DuPont equation Sony Corp has an equity multiplier of 234 times total assets of 4512895 a ROE of 175 percent and a total assets turnover of 31 times Calculate the rm39s ROA 623 453 748 579 What is quotreal in ationquot The money you will actually receive The true purchasing power The amount of time in an investment The taxes on the investment What is quotnominal in ationquot The true purchasing power The money you will actually receive The taxes on the investments The amount of time in an investment Choose the correct in ation equation PV CFin ation rate PV in ation rateCF PV rea in ation ratenominal in ation rate PV CF1in ation rate1real rate What is the sher equation in ation real rate 1 real rate in ation rate 1 1in ation rate1real rate 1nominal rate Unwgtmoowgtwonwgteonwgtwonwgt nominal rate in ation rate 1 7 In volatility increases as term to maturity increases Investors require higher yields for longer investments A Segmented Market B Treasury Bonds C Liquidity Preference D Retail Market 8 Choose the correct word for this de nition Corporations and investors can manage their taxes Shape of yield curve re ects supply and demand for funds in each segment A Segmented Market B Bene ts of Repo Treasury Bonds EAR What is not one of the 6 Primary Attributes for determining yield of bond Tax Status Liquidity Coupon Rate UDWZDLOUO Treasury Bonds 10 Where do dealers do business with customers A Bonds Market B Retail Market C Stock exchange D Segmented Market 11 Which is not one of the bene ts of repo A Essentially owning securities on borrowed money B No margin requirements so investors can stock massive amounts of inventory C Less taxes on investments D A pro table way to buy securities 12 What is the expectations hypothesis A A yield curve re ects short period rates B A yield curve that re ects long period rates C A long curve of period rates D A period rate that re ects high yields 13 Naps lnc has issued a threeyear bond that pays a coupon of 610 percent Coupon payments are made semiannually Given the market rate of interest of 580 percent what is the market value of the bond A 94754 B 100815 C 110845 D 99867 14 You are interested in investing in a veyear bond that pays a 78 percent coupon with interest to be received semiannually Your required rate of return is 84 percent What is the most you would be willing to pay for this bond A 97591 B 96055 C 90376 D 98732 15 John is interested in buying a veyear zero coupon bond with a face value of 1000 She understands that the market interest rate for similar investments is 9 percent Assume annual coupon payments What is the current value of this bond A 67543 B 63050 C 64993 D 63533 16 Tenyear zero coupon bonds issued by the US Treasury have a face value of 1000 and interest is compounded semiannually If similar bonds in the market yield 105 percent what is the value of these bonds A 31290 B 35938 C 34578 D 35022 17 Pullman Corp issued 10year bonds four years ago with a coupon rate of 9375 percent At the time of issue the bonds sold at par Today bonds of similar risk and maturity must pay an annual coupon of 625 percent to sell at par value Assuming semiannual coupon payments what will be the current market price of the rm39s bonds A 124356 B 139040 C 115438 D 110043 18 Rockne Inc has outstanding bonds that will mature in six years and pay an 8 percent coupon semiannually If you paid 103665 today and your required rate of return was 66 percent What is the worth of the bond A 106845 B 114033 C 130143 D 102332 19 Ropes Corp plans to issue sevenyear zero coupon bonds It has learned that these bonds will sell today at a price of 43976 Assuming annual coupon payments what is the yield to maturity on these bonds A 13 B 125 C 1175 D 12 20 Fasten Corp is a fastgrowing company that expects to grow at a rate of 30 percent over the next two years and then to slow to a growth rate of 18 percent for the following three years If the last dividend paid by the company was 215 What is the dividend for lst year A 2795 B 2967 C 2348 D 2863 21 Donte Corp has not grown for the past several years and management expects this lack of growth to continue The rm last paid a dividend of 356 If you require a rate of return of 13 percent what is the current value of this stock to you A 2954 B 3065 C 2738 D 2876 22 The current stock price of Lazy lnc is 4472 If the required rate of return is 19 percent what is the dividend paid by this rm if the dividend is not expected to grow in the future A 898 B 850 C 915 D 829 23 Birds lnc is a consumer products rm that is growing at a constant rate of 65 percent The rm39s last dividend was 336 If the required rate of return is 18 percent what is the market value of this stock if dividends grow at the same rate as the rm A 3111 B 3789 C 4130 D 3376 24 Friday Energy Company has issued perpetual preferred stock with a stated par value of 100 and a dividend of 45 percent If the required rate of return is 825 percent what is the stock39s current market price A 5076 B 4987 C 5455 D 5233 25 You own shares of Oswald CD Company and are interested in selling them With so many people downloading music these days sales pro ts and dividends at Oswald have been declining 6 percent per year The rm just paid a dividend of 115 per share The required rate of return for a stock this rislq is 15 percent If dividends are expected to decline at 6 percent per year what is a share of the stock worth today A 515 B 587 C 539 D 502

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