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Name __________________________________
PeopleSoft # __________________________________
University of Houston
C. T. Bauer College of Business
Finance 3332
Principles of Financial Management
Summer 6 week2
nd
, 2010
Exam 2A
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)
o
Either form is acceptable
•
Currency answers rounded to the nearest cent, where applicable
•
Include applicable units on answers
1. Guadalupe borrowed $80,000 at a nominal annual rate of 4 percent for 15 years. How much will be his
monthly
payments? (8)
2. How much must I deposit today, if I want to have $5000 in my account in 4 years, and the account
earns an interest rate of 6 percent compounded continuously? (4)
3. What is the value of a preferred stock which pays an annual dividend of $8 per year to an investor who
requires a 7 percent return? (4)
4. You are analyzing a stock with a beta of 0.4. The riskfree rate is 4 percent, and the market risk
premium is 6%. What is the stock’s equilibrium required rate of return? (6)
5. What is the probability of earning a return less than 30 percent on a stock whose returns are normally
distributed with an expected return of 20 percent and a standard deviation of 40 percent? (6)
6. What is the market value of a $1000 par bond with a five percent coupon, which is paid semiannually,
if its yield to maturity is four percent and it matures in 18 years? (6)
7. Circle the correct response. (2) A thirtyyear, 5 percent coupon bond, with a par value of $1000 sells at
$1084.25. This bond is said to be selling at:
par
a premium
a discount
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 Spring '08
 DARLACHISHOLM
 Finance

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