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Unformatted text preview: FNAN 301, Fall 2010, quiz 3, solutions Conceptual: relative risk (and returns) of bonds, preferred stock, and common stock 1. Labrador Inc. has issued bonds, common stock, and preferred stock. The YTM on the bonds is 8% and the expected annual return on the preferred stock is 14%. Which of the following assertions about the expected annual return on the common stock issued by Labrador is most likely to be true? A. The expected annual return on the common stock is 4% B. The expected annual return on the common stock is 8% C. The expected annual return on the common stock is 12% D. The expected annual return on the common stock is 14% E. The expected annual return on the common stock is 19% 1. Labrador Inc. has issued bonds, common stock, and preferred stock. The YTM on the bonds is 14% and the expected annual return on the preferred stock is 19%. Which of the following assertions about the expected annual return on the common stock issued by Labrador is most likely to be true? A. The expected annual return on the common stock is 9% B. The expected annual return on the common stock is 14% C. The expected annual return on the common stock is 16% D. The expected annual return on the common stock is 19% E. The expected annual return on the common stock is 21% 1. Labrador Inc. has issued bonds, common stock, and preferred stock. The YTM on the bonds is 12% and the expected annual return on the common stock is 17%. Which of the following assertions about the expected annual return on the preferred stock issued by Labrador is most likely to be true? A. The expected annual return on the preferred stock is 4% B. The expected annual return on the preferred stock is 12% C. The expected annual return on the preferred stock is 14% D. The expected annual return on the preferred stock is 17% E. The expected annual return on the preferred stock is 21% 1. Labrador Inc. has issued bonds, common stock, and preferred stock. The YTM on the bonds is 8% and the expected annual return on the common stock is 14%. Which of the following assertions about the expected annual return on the preferred stock issued by Labrador is most likely to be true? A. The expected annual return on the preferred stock is 4% B. The expected annual return on the preferred stock is 8% C. The expected annual return on the preferred stock is 12% D. The expected annual return on the preferred stock is 14% E. The expected annual return on the preferred stock is 19% 1 FNAN 301, Fall 2010, quiz 3, solutions Rate of return with a stock 2. Today, you sold 1 share of Jacket Gelato Corp. stock. Your percentage return over the past quarter on this share was 7.0 percent. You purchased the share three months ago at a price of $95.00. Today, you sold it for $90.00 per share. The stock just paid a dividend. What was the amount of the dividend that was just paid by Jacket Gelato?...
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This note was uploaded on 02/03/2011 for the course FINANCE 301 taught by Professor Murray during the Spring '09 term at George Mason.
 Spring '09
 MURRAY

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