exam2d.ch5ch5ach6ch7ch8

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Name __________________________________ Webct User ID __________________________________ University of Houston C. T. Bauer College of Business Principles of Financial Management Finance 3332 Exam 2D: Spring, 2009 To receive full credit: Show equations either in variable form or equations with numbers plugged in. Calculator financial function inputs must be shown. Clearly indicate your answer. Carry all decimals, rounding only final answer. Decimal places should be rounded to four places (two in decimal form) and currency answers rounded to the nearest cent, where applicable. Point values are in parentheses. 1.  What is value  of a  seven  percent  coupon,  \$1000  par  bond,  which  matures  in 15  years,  if the   bond’s  yield  to maturity is five  percent?  (6) 2.  A seven  percent  coupon,  \$1000  par  bond,  matures  in 15  years,  is callable  in 9 years  at 110,   and  is selling  for \$987.55.  What is the  bond’s  yield  to call?   (8)   3.  What is the  probability of earning  a  return  greater  than  10  percent  on  a  stock  whose  returns   are  normally  distributed  with an  expected  return  of 38.4  percent  and  a  standard  deviation  of 20   4.  A com m o n  stock  is expected  to pay  dividends  over  the  next  two years  of \$1.00  and  \$1.20,   respe ctively.  After  that, the  firm’s  earnings  and  dividends  are  expected  to grow  at a  constant   rate  of 5 percent.  What is the  value  of this  stock  if its required  rate  of return  is 14  percent?  (6) Use the following information for problems 5 – 7. Stock Expected Return (%) Beta Varianc e (% 2 ) Covariance (σ i,j ) (% 2 ) K 18 0.9 400 σ   K,L  = 480 L 15 1.2 900 σ   L,M  = 480 M 20 2.6 1600 σ   K,M  = 160 5.  Calculate  the   beta  of a  portfolio  consisting  of 30  percent  of the  funds  invested  in stock  M and  70

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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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