Finance 350 Week 4 Homework Quiz

Finance 350 Week 4 Homework Quiz - 1. Doug has been...

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1. Doug has been approached by his broker to purchase a bond for $850. He believes the bond should yield 10%. The bond pays 7% annual coupon rate and has 12 years left until maturity. What should Doug’s analysis of the bond indicate to him? a. the bond is undervalued, purchase b. the bond is undervalued, do not purchase c. the bond is overvalued, purchase d. the bond is overvalued, do not purchase 2. Star Corporation issued bonds 2 years ago with a 9% coupon rate. Their bonds are currently trading for $928 in the market. Which of the following most likely occurred since the time of issue? a. The interest rate decreased b. Inflation increased c. Risk increased d. Real rates of return decreased 3. Two years ago Maple Enterprises issued 6%, 20 years bonds and Temple Corporation issued 6%, 10 years bonds. Since their time of issue, interest rates have increased. Which of the following statements is true for each firm’s bond prices in the market, assuming they have equal risks? a. Maple’s decreased more than Temple’s b. Temple’s decreased more than Maple’s c.
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Finance 350 Week 4 Homework Quiz - 1. Doug has been...

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