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Unformatted text preview: Engineering 111 Practice Final Exam Winter 2008 Prof. Bristow Write you first and last name here: (If you do not, you get zero credit.) This is the practice final exam for the ENGR 111. Q1. What is today’s price for a 20 year maturity zero coupon bond with a face of $1,000 an a yield to maturity of 4%? ANS: PV=1000/(1+0.04)^20=456 Q2. Consider a U.S. government bond with a 6% coupon that expires in December 2010. The YTM is 5%. - The Par Value of the bond is $1,000. - Coupon payments are made semi-annually (June 30 and December 31 for this particular bond). - Since the coupon rate is 6%, the payment is $30. - On January 1, 2007 what is the bond’s price? ANS: Bond Price =(C/R)*(1-1/(1+R)^T)+PV/(1+R)^T=(30/0.025)*(1-1/(1.025)^8)+1000/(1.025)^8=1036 Q3. Is the bond in the previous question trading at a premium, discount or at par? ANS: Premium Q4. Will the purchaser of the bond in the previous question have a capital gain, capital loss or neither if the buyer holds to the time of maturity? ANS: Loss Q5. Suppose Big D, Inc., just paid a dividend (D o ) of $0.05. It is expected to increase its dividend by 2% per year. If the market requires a return of 12% on assets of this risk level, for what price should the stock be selling today?...
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This note was uploaded on 04/05/2010 for the course ENGR 111 taught by Professor King during the Winter '09 term at UCLA.
- Winter '09