Exam2e.ch6ch7ch8 - Name PeopleSoft University of Houston C T Bauer College of Business Finance 3332 Principles of Financial Management Spring 2010

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Name __________________________________ PeopleSoft # __________________________________ University of Houston C. T. Bauer College of Business Finance 3332 Principles of Financial Management Spring, 2010 Exam 2E Point values are in parentheses. To receive full credit: Clearly indicate your answer Financial functions may be used, but all inputs must be clearly shown Carry all decimals, rounding only final answer Final answer decimal places should be rounded to four places (two in percent form) Currency answers rounded to the nearest cent, where applicable Include applicable units on answers 1. What is the value of a firm’s $6 preferred stock with a $100 par value if the required rate of return is 11 percent? (4) 2. Circle the correct response. (4) An eight percent, annual coupon, $1000 par bond, which matures in 20 years, has a yield to maturity of six percent. This bond is said to be selling: at a discount at par at a premium 3. You are analyzing a stock with a beta of 1.6. The risk-free rate is 2%, and the expected return on the market is 8%. What is the stock’s equilibrium required rate of return? (6) 4. From the information from the previous question, what is the market risk premium? (2) 5. I’m evaluating a common stock that just paid a dividend of $1.50 per share. What is the value of this stock if I expect earnings and dividends to grow at a rate of 4 percent for the foreseeable future, and I require a 9 percent return? (6) 6. What is the probability of earning a return less than 25 percent on a stock whose returns are normally
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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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Exam2e.ch6ch7ch8 - Name PeopleSoft University of Houston C T Bauer College of Business Finance 3332 Principles of Financial Management Spring 2010

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