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q2version1 (1) - MGT 3062 FINANCIAL MANAGEMENT SPRING 2011...

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MGT 3062 FINANCIAL MANAGEMENT SPRING 2011 QUIZ 2 Student: ____________________________________________________ ID: ______________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel the answer is not provided, show your work, explain your assumptions, and write your answer on the exam. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after the initial instructions are given. Ethics Challenge: I certify by my signature that: the work on this exam is my own without any outside assistance, that I did not provide assistance to another classmate, that I used no electronic devices for information storage, retrieval, or communications, that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. I further understand that my professor will do everything within his power to expel me from Georgia Tech if I am found in violation of the Georgia Tech honor code. Signature:____________________________________________________________________________ 1. The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity? A. 5.87 percent B. 6.08 percent C. 6.20 percent D. 5.92 percent E. 6.14 percent 2. Jen's Fashions is growing quickly. Dividends are expected to grow at a 22 percent rate for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter. The required return is 12 percent and the company just paid a $3.80 annual dividend. What is the current share price? A. $131.11 B. $128.96 C. $148.87 D. $152.20 E. $146.17 3. Mary just purchased a bond which pays $60 a year in interest. What is this $60 called? A. face value B. call premium C. yield D. discount E. coupon THE BUSINESS SCHOOL AT GEORGIA TECH Barry Marchman Ph.D. Room 413 (404) 894-5110
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4. Miller Brothers Hardware paid an annual dividend of $1.15 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 12 percent rate of return, how much are you willing to pay to purchase one share of this stock today? A. $12.23
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This note was uploaded on 02/09/2012 for the course MGT 3078 taught by Professor Marchman during the Spring '12 term at Georgia Tech.

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q2version1 (1) - MGT 3062 FINANCIAL MANAGEMENT SPRING 2011...

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