exam2d.ch6ch7ch8 (1)

exam2d.ch6ch7ch8 (1) - Name _ Webct User ID _ University of...

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Name __________________________________ Webct User ID __________________________________ University of Houston C. T. Bauer College of Business Finance 3332 Principles of Financial Management Fall, 2007 Exam 2D To receive full credit, show all work—equations in variable form, equations with numbers plugged in—and clearly indicate your answer. Financial functions may be used only for finding annuity factors, and all inputs must be shown. 1. What is the value of a $1000 par bond paying an 8 percent coupon and maturing in 16 years to an investor who  requires a 6 percent return? () b) Circle  the term that correctly completes the following statement: The above bond is selling at: a discount par a premium.  2. You are analyzing a stock with a beta of 1.8. The risk-free rate is 6 percent, and the expected return on the market is  10%. What is the stock’s appropriate required rate of return? (4) b) Given the above information, what is the market risk premium? 3. What is the market price of one of Manvey Corporation’s $1000 par, zero coupon bonds which matures in 11 years  and has a yield to maturity of 12 percent? (4) 4. What is the standard deviation of returns for the stock given the following data if its expected return is 36 percent?  (6) State Probabilit y Expected Return Normal 70% 60% Recession 30% -20% 5. What is the probability of earning positive returns on stock with an expected return of 33 percent and a standard  deviation of 12 percent? (6) 6. You calculate from the security market line an equilibrium return on a stock to be 10 percent. Based on the stock’s  market price, you estimate a return of 8 percent. Determine whether the stock is over, under, or correctly valued, and 
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This note was uploaded on 02/13/2011 for the course FINA 3332 taught by Professor Darlachisholm during the Spring '08 term at University of Houston.

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exam2d.ch6ch7ch8 (1) - Name _ Webct User ID _ University of...

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