exam2a.ch6ch7ch8 (1)

exam2a.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 2A 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, and all inputs must be shown. 1. What is the standard deviation of returns for the stock given the following data if its expected return is 14 percent?  (6) State Probabilit y Expected Return Normal 60% 30% Recession 40% -10% 2. What is the probability of earning positive returns on stock with an expected return of 13.68 percent and a standard  deviation of 12 percent, assuming the stock’s returns are normally distributed? (6) 3. a) You are analyzing a stock with a beta of 0.8. The risk-free rate is 4 percent, and the market risk premium is 7%.  What is the stock’s appropriate required rate of return? (3 b) Given the above information, what is the expected return on the market? (1) 4. a) What is the value of a $1000 par bond paying a 4 percent coupon and maturing in 8 years to an investor who  requires a 6 percent return? (8) b) Circle  the term that correctly completes the following statement: The above bond is selling at: a discount par a premium.  5. What is the market price of Jundry Corporation’s $1000 par, zero coupon bonds which matures in 5 years and has a  yield to maturity of 7 percent? (4) 6. Determine the value of a share of $2.00 cumulative preferred stock, no par, to an investor who requires an 8 percent 
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exam2a.ch6ch7ch8 (1) - Name _ Webct User ID _ University of...

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