Multiple Choice
Identify the choice that best completes the statement or answers the question.

1)Ken Williams Ventures' recently issued bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 8%, at what price should the bonds sell? |A. |$801.80 | |B. |$814.74 | |C. |$828.81 | |D. |$830.53 | |E. |$847.86 |

2)Brown Enterprises' bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their yield to maturity? |A. |6.87% | |B. |7.03% | |C. |7.21% | |D. |7.45% | |E. |7.61% |

3)Kholdy Inc's bonds currently sell for $1,275. They pay a $120 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,120. 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. What is the difference between the bond's YTM and its YTC? |A. |1.48% | |B. |1.54% | |C. |1.68% | |D. |1.82% | |E. |1.91% |

4)A 20-year, $1,000 par value bond has a 9% annual coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? |A. |$933.09 | |B. |$941.86 | |C. |$951.87 | |D. |$965.84 | |E. |$978.40 |

5)Which of the following statements is CORRECT?
|A. |The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in | | |interest rates....

...accept both if independent.
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Quiz
Internal rate of return, IRR, will increase as the required rate of return of a project is increased? False. If the project’s payback period is greater than or equal to zero, the project should always be accepted? False. When several sign reversals in the cash flow stream occur, the IRR equation can have more that one positive IRR? True. A new forklift under consideration by Home...

...Finance 301
1. The NPV for the truck and the pulley are $2026.75 and $5586.05 respectively. Since these projects are independent, the company can choose either project. They both will give the company a return higher than 12% as well. (Math is on last page)
2. A. NPV for Alt A is $1892.17 while the payback is 2.86 years. NPV for Alt B is 2289.66 while the payback is 4.62 years. (Math on last page)
B. Since these projects are mutually exclusive only one can be chosen....

...The Preferred capital budgeting technique
The sum of the present values of all of a projects cash flows, both inflows and outflows, discounted at a rate consistent with the project’s risk. Also, the preferred method for valuing capital investments
IRR: NPV; Payback period (know the pros and cons of these three capital budgeting techniques)
...

...be accepted if NPV is positive, such project increases shareholder value
-Internal rate of return (IRR): discount rate that forces project’s NPV to equal zero. Project should be accepted if IRR is greater than cost of capital
-If projects are mutually exclusive, NPV should be relied upon
-NVP assumes cash flows will be reinvested at firm’s cost of capital, IRR assumes reinvestment at project’s IRR
-MIRR: involves finding terminal...

...cost of equity.
c. The WACC that should be used in capital budgeting is the firm’s marginal, after-tax cost of capital.
d. Retained earnings that were generated in the past and are reflected on the firm’s balance sheet are generally available to finance the firm’s capital budget during the coming year.
e. The after-tax cost of debt is generally more expensive than the after-tax cost of preferred stock.
WACC and capital components Answer: a MEDIUM
xxxvii. For a company...

...FNCE 404 ExamReview – Fall2012
Prof. Eloisa Perez
Q1. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials which are used in a variety of pigment applications in many other industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Ghana for 10,000,000 cedis,...

...International finance
FIN 412
Exam #2
MC: Examples of "single-currency interest rate swap" and "cross-currency interest rate swap" are:
A. fixed-for-floating rate interest rate swap, where one counterparty exchanges the interest payments of a floating- rate debt obligations for fixed-rate interest payments of the other counter party
B. fixed-for-fixed rate debt service (currency swap), where one counterparty exchanges the debt service obligations of a bond...