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Exam2B Answer Key Wed Class

Exam2B Answer Key Wed Class - FIN350 Quiz 2 Wednesday First...

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FIN350 Quiz 2 Wednesday First Name___________ Last Name _______ Version B YTM=CGY+CY 1. In corporate finance, _______ is a measure of a company's financial performance by deducting (after tax) cost of capital from its NOPAT (net operating profit after tax). A) MVA B) economic value added C) earning value added D) most valued asset 2. Interest income on which of the following securities may be exempt from federal tax? 3. How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 7 years if the interest rate is 5%? 4. If a bond issued by First Boston Bank has a Standard & Poor's credit rating of BBB, it is referred to as a(n) ___ . 5. Which of the following bonds would be likely to exhibit a greater degree of interest-rate risk? That is, which bond's price will be most sensitive to changes in interest rate? A) A floating-rate bond with 20 years until maturity. B) A coupon-paying bond with 24 years until maturity. C) A zero-coupon bond with 25 years until maturity. D) A zero-coupon bond with 23 years until maturity. E) A treasury bill with 3 months until maturity. 6. What is the current yield of a bond of 4 years maturity with a 4% coupon and a price of $950? FIN350 Li 1
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7. If currently the Treasury yield curve is a normal yield curve, what is the yield to maturity on a 13-year Treasury bond, relative to that on a 2-year Treasury note?
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