ch5_sample - BUS 323 Fin. Mgt. Dr. G Spring 2004 EXAM 2- in...

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BUS 323 Fin. Mgt. EXAM 2- in class NAME____________________________ Dr. G Spring 2004 1. (8 points) A General Motors bond has a par value of $1000 and matures in 13 years. The coupon rate is 12 percent, and interest is paid semiannually. If an investor in similar bonds wants to earn a 10 percent annual yield to maturity: a. What is the price at which this GM bond should be selling on the market? price= $1143.75 or 114.375% of par b. Is it a premium or discount bond? Explain! bond is selling at premium, ytm less than coupon 2. (8 points) The XYZ bond was quoted in the newspaper at a price of 101 1/8. The bond has a par value of $1000 and pays an 8.7 % coupon rate, semiannually. a. What is the dollar price that an investor would pay to buy the bond? $ 1011.25 b. What is the current yield for the bond? 8.60% 3. (8 points) If the risk free rate is 3.8% and the market risk premium is 4.6%, a. What is the expected return for the overall stock market? 3.8 + 4.6 = 8.4% b. What return should common stockholders expect to receive if the XYZ company has a Beta of 0.45 ? k = 3.8 + 0.45 * 4.6 = 5.87% Multiple choice (2 points each) 1. If the expected rate of return on a stock exceeds the required rate, a. The stock is experiencing supernormal growth. b.
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ch5_sample - BUS 323 Fin. Mgt. Dr. G Spring 2004 EXAM 2- in...

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