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Unformatted text preview: 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. Rina is considering buying a new car. The sticker price is RM15,000 and she has RM2,000 to put toward a down payment. If she can negotiate a nominal annual interest rate of 10 percent and she wishes to pay for the car over a 5- year period, what are her monthly car payments? a. RM216.67 b. RM252.34 c. RM276.21 d. RM285.78 e. none of the above 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. none of the above 3. Pepsi Corporation's current ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions? a. The transactions will have no effect on the current ratios. b. The current ratios of both firms will be increased. c. The current ratios of both firms will be decreased. d. Only Pepsi Corporation's current ratio will be increased. e. Only Coke Company's current ratio will be increased. CFGB 6102/2 4. Shuhada intends to purchase a 10-year, RM1,000 face value bond that pays interest of RM60 every 6 months. If her nominal annual required rate of return is 10 percent with semiannual compounding, how much should she be willing to pay for this bond? a. RM1,086.15 b. RM 957.50 c. RM1,431.49 d. RM1,124.62 e. none of the above 5. Assume that Raeleen wishes to purchase a 20-year bond that has a maturity value of RM1,000 and makes semiannual interest payments of RM40. If she requires a 10 percent nominal yield to maturity on this investment, what is the maximum price she should be willing to pay for the bond? a. RM619 b. RM674 c. RM761 d. RM828 e. none of the above 6. A RM1,000 par value bond pays interest of RM35 each quarter and will mature in 10 years. If Kates nominal annual required rate of return is 12 percent with quarterly compounding, how much should she be willing to pay for this bond? a. RM 941.36 b. RM1,051.25 c. RM1,115.57 d. RM1,391.00 e. none of the above 7. Consider a RM1,000 par value bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10 percent?...
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- Spring '10
- Corporate Finance