ADMS3530-Final-S07

ADMS3530-Final-S07 - Name _ Section _ ID # _ Prof. Kings...

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Name ________________________ Section _____ ID # __________________ Prof. King’s section C & Prof. Alagurajah’s sections A and D) AK/ADMS 3530 Final Exam Summer 2007 August 14 th . 7 -10 pm Type A Exam 50 Multiple Choice Questions 2 marks each for a total of 100 marks Choose the response which best answers each question. Circle your answers below, and fill in your answers on the bubble sheet. Only the bubble sheet is used to determine your exam score . BE SURE TO BLACKEN THE BUBBLES CORRESPONDING TO YOUR STUDENT NUMBER. Please note the following points : 1) Please use your time efficiently and start with the questions that you are most comfortable with first. 2) Read the exam questions carefully; 3) Choose the answers that are closest to yours, because of possible rounding; 4) Keep at least 2 decimal places in your calculations and final answers, and at least4 decimal places for interest rates; 5) Interest rates are annual unless otherwise stated; 6) Bonds pay semi-annual coupons unless otherwise stated; 7) Bonds have a par value (or face value) of $1,000; and 8) You may use the back of the exam paper as your scrap paper. Good Luck.
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32 Calculation Questions (2 marks each) 1. The common stock of Robin's Tools sells for $24.50. The firm's beta is 1.2, the risk- free rate is 4%, and the return on the market portfolio is 12%. Next year's dividend is expected to be $1.50. Assuming that dividend growth is expected to remain constant for Robin’s Tools over the foreseeable future, what is the firm's anticipated dividend growth rate? A) 6.65% B) 7.48% C) 9.15% D) 13.6% E) 15.0% 2. What is the yield to maturity on a 10-year zero-coupon bond with a $1,000 face value selling at $742? A) 3.03% B) 7.42% C) 13.48% D) 34.78 E) 42.37% 3. Consider the following monthly cash flows (see the diagram below): Cash flows of an amount X are made for months 1, 3, 5, …, 17 and 19 (the ten odd- numbered months) and cash flows of an amount Z are made for months 2, 4, 6, …, 18 and 20 (the ten even-numbered months). The APR is 6% and is compounded on a monthly basis. What is the present value of these cash flows today if X = $2,000 and Z = - $700? A) 12,311 B) 12,406 C) 25,569 D) 25,664 E) 32,955 Today 1 2 3 4 19 20 X Z X Z X Z
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4. TD Bank’s earnings and dividends are expected to grow at a rate of 10% during the next 2 years, at 8% in the third year, and at a constant rate of 6% thereafter. If last dividend paid was $2.00 and the required rate of return on its common stock is 12%. How much should you pay today for one share of TD Bank? A) $19.31 B) $24.66 C) $38.62 D) $51.93 E) $55.41 5. Atkinson Co. will finance its expansion through additional bond sales. Its current outstanding bonds are selling for $919.71. These have a 6% coupon rate, pay interest semi-annually and will mature in 12 years. What must the coupon rate of the new bonds be in order to sell the issue at par, if they will also mature in 12 years and pay semi-annual coupons? A)
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This note was uploaded on 01/26/2010 for the course ADMS 3530 taught by Professor Unknown during the Spring '09 term at York University.

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ADMS3530-Final-S07 - Name _ Section _ ID # _ Prof. Kings...

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