1. Three $1,000 face value bonds that mature in 10 years have the same level of risk, hence their YTMs are equal. Bond A has an 8% annual coupon, Bond B has a 10% annual coupon, and Bond C has a 12% annual coupon. Bond B sells at par. Assuming interest rates remain constant for the next 10 years, which of the following statements is CORRECT? Answer: D. Bond A sells at a discount (its price is less than par), and its price is expected to increase over the next year. Explanation: Discount because As' return is lower than the one demanded by market. Price will increase because the smaller YTM the smaller discount (or bigger premium) for difference in bonds' and market returns.

2. Which of the following statements is CORRECT?
Answer: E. The actual life of a callable bond will always be equal to or less than the actual life of a noncallable bond with the same maturity. Therefore, if the yield curve is upward sloping, the required rate of return will be lower on the callable bond. Explanation: A callable bond (also called redeemable bond) is a type of bond (debt security) that allows the issuer of the bond to retain the privilege of redeeming the bond at some point before the bond reaches its date of maturity. In other words, on the call date(s), the issuer has the right, but not the obligation, to buy back the bonds from the bond holders at a defined call price. Technically speaking, the bonds are not really bought and held by the issuer but are instead cancelled immediately.

3. Which of the following statements is CORRECT?
Answer: A. Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par while the other sells at a premium above par. The premium bond must have a lower current yield and a higher capital gains yield than the par bond.

4. Suppose a new company decides to raise a total of $200 million, with $100 million as common equity and $100 million as long-term debt. The debt can be...

...FIN534 Quiz 1 Week 1
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Question 1
You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this transaction?
1) This is an example of an exchange of physical assets.
2) This is an example of a primary market transaction.
3) This is an example of a direct transfer of capital.
4) This is an example of a money market transaction.
5) This is an example of a derivatives market transaction.
Question 2
Which of the following statements is CORRECT?
1) While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties
2) A liquid security is a security whose value is derived from the price of some other "underlying" asset
3) Money market mutual funds usually invest most of their money in a well-diversified portfolio of liquid common stocks.
4) Money markets are markets for long-term debt and common stocks.
5) The NYSE operates as an auction market, whereas the Nasdaq is a dealer...

...Question 1
Your finance text book sold 53,250 copies in its first year. The publishing company expects the sales to grow at a rate of 20 percent for the next three years, and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in year 3 and 4. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answers to the nearest whole number.)
Number of copies sold after 3 years
Number of copies sold in the fourth year
Link to Text
Question 2
Find the present value of $3,500 under each of the following rates and periods.
(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)
a. 8.9 percent compounded monthly for five years.
Present value
$
b. 6.6 percent compounded quarterly for eight years.
Present value
$
c. 4.3 percent compounded daily for four years.
Present value
$
d. 5.7 percent compounded continuously for three years.
Present value
$
2949.88
Question 3
Trigen Corp. management will invest cash flows of $331,000, $616,450, $212,775, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.75 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)
Future...

...FIN534 Discussion Questions Week 1-11 Solution
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FIN534Week 1-11 Discussion Questions Solved
Week 1 DQ 1
Discussion 1: An Overview of Financial Management.
A. In your judgment, what were the principal causes of the recent financial crisis and Great Recession? Would you include Government policies that encouraged housing purchases for those who could not afford them, artificially low interest rates implemented by the Federal Reserve, banks and mortgage brokers who were greedy, the failure of Government regulators to provide proper oversight to the banks and other financial institutions, individuals who borrowed and spent more than they should have, or some other causes?
.
B. From the e-Activity, examine ethical behavior within firms in relation to financial management. Provide at least two (2) recent (in the last 5 years) examples (other than Enron, WorldCom, and Bernie Madoff) of companies that have been guilty of ethics-based malfeasance related to financial management. What were the specific sanctions that were imposed and explain why the sanctions and penalties were...

...regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)
Answer
Selected Answer:
The outstanding balance declines at a faster rate in the later years of the loan’s life.
Correct Answer:
The outstanding balance declines at a faster rate in the later years of the loan’s life.
.
Question 3
.
2 out of 2 points
You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?
Answer
Selected Answer:
The discount rate increases.
Correct Answer:
The discount rate increases.
.
Question 4
.
0 out of 2 points
Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?
Answer
Selected Answer:
If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%.
Correct Answer:
A bank loan's nominal interest rate will always be equal to or less than its effective annual rate.
.
Question 5
.
0 out of 2 points
Which of the following statements is CORRECT?
Answer
Selected Answer:
If you solve for I and get a negative number, then you must have made a mistake.
Correct Answer:
If CF0
is positive and all the other CFs are negative, then you can still solve for I.
....

...DOWNLOAD
MAT540 Week3HomeworkChapter 14
1. The Hoylake Rescue Squad receives an emergency call every 1, 2, 3, 4, 5, or 6 hours, according to the following probability distribution. The squad is on duty 24 hours per day, 7 days per week:
Time Between
Emergency Calls (hr.)
Probability
1
0.05
2
0.10
3
0.30
4
0.30
5
0.20
6
0.05
1.00
a. Simulate the emergency calls for 3 days (note that this will require a “running”, or cumulative, hourly clock), using the random number table.
b. Compute the average time between calls and compare this value with the expected value of the time between calls from the probability distribution. Why are the results different?
2. The time between arrivals of cars at the Petroco Service Station is defined by the following probability distribution:
Time Between
Arrivals (min.)
Probability
1
0.15
2
0.30
3
0.40
4
0.15
1.00
a. Simulate the arrival of cars at the service station for 20 arrivals and compute the average time between arrivals.
b. Simulate the arrival of cars at the service station for 1 hour, using a different stream of random numbers from those used in (a) and compute the average time between arrivals.
c. Compare the results obtained in (a) and (b).
3. The Dynaco Manufacturing Company...

...company’s stock price will move according to demands of the investors change in policy.
2. Which of the following statements is CORRECT?
c. Stock repurchases can be used by a firm that wants to increase its debt ratio. Stock repurchases reduce the number of shares outstanding and are often accompanied by a stock price increase.
3. Which of the following statements is CORRECT?
e. If a firm’s stock price is quite high relative to most stocks—say $500 per share—then it can declare a stock split of say 10-for-1 so as to bring the price down to something close to $50. Moreover, if the price is relatively low—say $2 per share—then it can declare a ―reverse split‖ of say 1-for-25 so as to bring the price up to somewhere around $50 per share.
The stock price will decline and the quantity of shares outstanding will increase, the ratio does not matter.
4. Which of the following statements is CORRECT?
a. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm’s dividend payout.
Large investment opportunities coupled with low funds will have a low dividend payout.
5. DeAngelo Corp.'s projected net income is $150.0 million, its target capital structure is 25% debt and 75% equity, and its target payout ratio is 65%. DeAngelo has more positive NPV projects than it can finance without issuing new stock, but its board of directors had decreed that it cannot issue...

...FIN534 Midterm Exam 1
1. Of the following investments, which would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.
2. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment?
3. Which of the following statements regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?
4. Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?
5. You are considering two equally risky annuities, each of which pays $25,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?
6. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
7. Which of the following statements is CORRECT?
8. Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT?
9. Which of the following statements is CORRECT?
10. Bonds A and B are 15-year, $1,000 face value bonds. Bond A has a 7% annual coupon, while Bond B has a 9% annual...

...FIN 370 Week3 Problems 4–6 through 5–6
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4-6. A cash budget is usually thought of as a means of planning for future financing needs. Why would a cash budget also be important for a firm that had excess cash on hand?
5-1A. (Compound interest) To what amount will the following investments accumulate?
$5,000 invested for 10 years at 10 percent compounded annually
$8,000 invested for 7 years at 8 percent compounded annually
$775 invested for 12 years at 12 percent compounded annually
$21,000 invested for 5 years at 5 percent compounded annually
5-4A. (Present value) What is the present value of the following future amounts?
$800 to be received 10 years from now discounted back to the present at 10 percent
$300 to be received 5 years from now discounted back to the present at 5 percent
$1,000 to be received 8 years from now discounted back to the present at 3 percent
$1,000 to be received 8 years from now discounted back to the present at 20 percent
5-5A. (Compound annuity) What is the accumulated sum of...