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Chapters_9_10_11_21_13_Rewiew[1]

Chapters_9_10_11_21_13_Rewiew[1] - Chapters 9 10 11 21 13...

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Chapters 9, 10, 11, 21, 13 Practice June 24, 2010 1 Chapter 9 1. What is the purpose of the money market? 2. If you pay $950 for a 28-day T-bill. It is worth $1,000 at maturity. What is the annualized yield? 3. What is the fed funds rate? 4. Can non-banks participate in the fed funds market. How about repurchase agreements? 5. Commercial paper is issued by what type of entity to borrow money and what is the maximum maturity? 6. The price of a 182-day commercial paper is $8000. If the annualized investment rate is 4.093%, what will the paper pay at maturity. 2 Chapter 10 1. What kind of Treasury security matures between 1 and 10 years. 2. When the yield on a 20 year Treasury Bond is the same as the yield as a 90-day Treasury bill, what does that say about the current economic environment? 1
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3. What is the current yield on a bond with a face value of $1,000, a price of $920, and coupon rate of 10%? 4. TIPS or Treasury Inflation Protection Securities incur what kind of risk: default risk, interest rate risk, call risk, purchasing power risk, or reinvestment risk. 5. Who gets paid first, secured creditors or debentures when a firm bankrupt. 3 Chapter 11 1. The board of directors authorizes 1000 shares. The firms sells 100 shares to the em- ployees and then IPOs 600 shares to the public. What is the number of outstanding shares? 2. What is a specialist? 3. What is the value of a stock that currently pays 3 dollars in dividends, its growth rate is 5%, and the expected returns is 10%? 4. Assume a firm solves the energy problem and no one has to pay for gas to fill up their cars anymore. Use the dividend discount model to predict g and k and the direction of stock prices. 5. The EPS for High Tech consulting is $2. The mean P/E for the industry is 20. Estimate High Tech’s price using the comparable approach. 6. The expected dividend and growth rate is $2 and 5%. You, Obama, and Tiger Woods all agree on that. However you believe the discount rate is 12%, Obama believes it is 10%, and Tiger believes it is 5%. What will be the prevailing price if only you three are the market participants?
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