Finance Questions

A government bond issued in Germany has a coupon rate of 3.3 %, face value of EUR 100 and is maturing in five years. The interest payments are made annually. Calculate the price of the bond (in EUR) if the yield to maturity is 3.5%.

According to the random walk theory, if the prices have been going up for the last 10 days, on the 11th day prices will

Which of the following statements regarding profitable and unprofitable growth is FALSE?If a firm wants to increase its share price, it must cut its dividend and re-invest more of its earningsIf the firm retains more earnings, it will be able to pay out less of those earnings, which means that the firm will have to reduce its dividend.A firm can increase its growth rate by retaining (and reinvesting) more of its earnings.Cutting the firm's dividend to increase investment will raise the stock price if, and only if, the new investments have positive NPV.

Which of the following observations would provide evidence against the strong form of efficient market theory? Select all that apply.Managers who trade in their own firm's stocks make superior returnsIPO stocks underperform other stocks with equal riskInvestors underreact to positive or negative earnings surprisesMutual fund managers do not on average make superior returnsIn any year approximately 50% of all pension funds outperform the market

Assume the following data for a stock, and 2-factor APT model:Risk-free rate = 1 %Factor-1 beta = 1.05Factor-2 beta= 1Factor-1 risk-premium = 8%Factor-2 risk-premium = 2%.Calculate the expected rate of return on the stock using the two-factor APT model

AAA Corp has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond filing says that the stated coupon rate for this bond is 4% and the coupon payments are to be made annually. Assuming the appropriate YTM on the AAA bond is 7.5%, then this bond will trade at

Taggart Transcontinental has a divided yield of 2.5%. Taggart's equity cost of capital is 10%, and its dividends are expected to grow at a constant rate. Based on this information, Taggart's constant growth rate in dividends is closest to:

AAA Inc has a dividend yield of 4.5% and a cost of equity capital of 12%. AAA's dividends are expected to grow at a constant rate indefinitely. The growth rate of AAA's dividends is closest to:

Which of the following statements is FALSE?As firms mature, their growth slows to rates more typical of established companies.The simplest forecast for the firm's future dividends states that they will grow at a constant rate, g, forever.We should use the general dividend discount model to value the stock of a firm with rapid or changing growth.The dividend discount model values the stock based on a forecast of the future dividends paid to shareholders.

AAA Inc has issued at par a zero-coupon bond with a ten-year maturity. Investors believe there is a 10% chance that AAA will default on these bonds. If they do default, investors expect to receive only 50 cents per dollar they are owned. What is the approximate expected return that investor will earn from this bond, if the bond is trading today at 90 percent of par value?

Firm AAA's earnings and dividends are expected to grow by a rate of 0.03 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 3, the cost of capital is 0.14, and next year's EPS is 9. What is AAA's stock price today?

Investments A and B both offer an expected rate of return of 2.5%. If the standard deviation of A is 12% and that of B is 10%, then investors would

The distribution of returns, measured over long intervals, like annual returns, can be approximated by which distribution

Firm AAA has a P/E ratio of 1.8 and a stock price of 13. Calculate earnings per share of the firm

You expect KT Industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 15% and their equity cost of capital is 12%. The value of a share of KTI's stock is closest to:

The standard deviation of returns of the market is 21 and the beta of a well-diversified portfolio is 1.9, calculate the standard deviation of the portfolio

If the present value of $6000 expected to be received one year from today is $400, what is the one-year discount rate?

Considering the dividend discount model, which statement is FALSE?During periods of high growth, it is not unusual for firms to pay out 100% of their earnings to shareholders in the form of dividends.A common approximation is to assume that in the long run, dividends will grow at a constant rate.The dividend each year is the firm's earnings per share (EPS) multiplied by its dividend payout ratio.There is tremendous uncertainty associated with any forecast of a firm's future dividends, and therefore its dividend growth rate.

The survey of CFOs indicates that the NPV method is always, or almost always, used for evaluating investment projects by:

Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%.Suppose you plan to hold Von Bora stock for only one year. Your capital gain rate from holding Von Bora stock for the first year is closest to: