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FIN 534 Final Exam Solutions – Perfect Score http://www.homeworkarena.com/fin-534-final-exam-solution-perfect-score CH: 4,5 Question 1 Which of the following statements is CORRECT? Question 2 Which of the following statements is CORRECT? Question 3 Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant? Question 4 You plan to invest some money in a bank account. Which of the following banks provides you with the highest effective rate of interest? Question 5 Which of the following statements is CORRECT? Question 6 Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.) Question 7
Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? Question 8 Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. Question 9 Which of the following statements is CORRECT? Question 10 You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? Question 11 A $150,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? Question 12 A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? Question 13 Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? Question 14 Which of the following bank accounts has the highest effective annual return? Question 15
0 out of 2 points Which of the following statements is CORRECT? Question 16 Which of the following statements is CORRECT? Question 17 A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par ($1,000). Which of the following statements is NOT CORRECT? Question 18 Which of the following statements is CORRECT? Question 19 A 12-year bond has an annual coupon rate of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT? Question 20 Which of the following statements is NOT CORRECT? Question 21 A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Both bonds have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT? Question 22 Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?
Question 23 Which of the following statements is CORRECT? Question 24 Which of the following bonds has the greatest interest rate price risk? Question 25 A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT? Question 26 Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72% A = 9.64% AAA = 8.72% BBB = 10.18% The differences in rates among these issues were most probably caused primarily by: Question 27 Which of the following statements is CORRECT? Question 28 Which of the following statements is CORRECT? Question 29 Which of the following statements is CORRECT? Question 30
Tucker Corporation is planning to issue new 20-year bonds. Initially, the plan was to make the bonds non-callable. If the bonds were made callable after 5 years at a 5% call premium, how would this affect their required rate of return?
