UNIVERSITY OF MALAYA
MID-SEMESTER EXAMINATION FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
ACADEMIC YEAR 2006/2007 – SEMESTER 1
CFGB6102: CORPORATE FINANCE
SEPTEMBER 2006
TIME: 2 HOURS
1.
Assume that you wish to purchase a bond with a 30-year maturity, an annual
coupon rate of 10 percent, a face value of RM1,000, and semiannual interest
payments.
If you require a 9 percent nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay for the
bond?
a.
RM905.35
b.
RM1,102.74
c.
RM1,103.19
d.
RM1,106.76
e.
RM1,149.63
2.
A bond has an annual 8 percent coupon rate, a maturity of 10 years, a face
value of RM1,000, and makes semiannual payments.
If the price is
RM934.96, what is the annual nominal yield to maturity on the bond?
a.
8%
b.
9%
c.
10%
d.
11%
e.
12%
3.
A bond has an annual 11 percent coupon rate, an annual interest payment of
RM110, a maturity of 20 years, a face value of RM1,000, and makes annual
payments.
It has a yield to maturity of 8.83 percent.
If the price is RM1,200,
what rate of return will an investor expect to receive during the next year?
a.
-0.33%
b.
8.83%
c.
9.17%
d.
11.00%
e.
None of the above
4.
You intend to purchase a 10-year, RM1,000 face value bond that pays interest
of RM60 every 6 months.
If your nominal annual required rate of return is 10
percent with semiannual compounding, how much should you be willing to pay
for this bond?
a.
RM
826.31