1.

FINA3383.03 Inc. just issued a 10 year 7% coupon bond. The face value of the bond is $1,000
and the bond makes ANNUAL coupon payments. If the required return on the bond is 10%, what is the
bonds price?
1.
$1,256.35
2.

$923.67

3.

$815.66

4.

$1,000.00
10 points

1.

QUESTION 2
FINA3383.03 Inc. just issued a 10-year 7% coupon bond. The face value of the bond is $1,000
and the bond makes SEMIANNUAL coupon payments. If the required return on the bond is 10%, what is
the bonds price?
1.
$1,035.27
2.

$815.66

3.

$813.07

4.

$1,000

10 points
QUESTION 3
1.
FINA3383.03 Inc. just issued a 10-year 12% coupon bond. The face value of the bond is $1,000
and the bond makes SEMIANNUAL coupon payments. If the bond is trading at $1,267.25, what is the
bonds yield to maturity?
1.
12.00%
2.

14.38%

3.

10.97%

4.

8.06%
10 points

1.

QUESTION 4
You are looking up bond prices in the newspaper and you find the following quote for a $1,000
face value treasury bond: 103:26. What is the price of this bond?
1.
$103.26
2.

$1,032.60

3.

$1,038.13

4.

$1,000
10 points

QUESTION 5
1.
Consider the following details for a bond issued by Bravo Incorporated.
Issue Date
8/5/2000
Maturity Date
8/5/2030
Annual Coupon Rate (semi-annual coupons)
9%

Face Value

$1,000

2.
3.

Suppose that todays date is 8/5/2004, what should the current trading price by for this bond if
investors want a 12% annual return?
1.
$763.13
2.

$1,000.00

3.

$906.85

4.

$762.08
10 points

1.

QUESTION 6
FINA3383.03 Inc. just paid a $1.57 dividend and investors expect that dividend to grow by 5%
each year forever. If the required return on the stock investment is 14%, what should be the price of the
stock today?
1.
$11.21
2.

$17.44

3.

$18.32

4.

$25.37

10 points
QUESTION 7
1.
Smith Construction, Inc. just paid a $2.78 dividend. The dividend is expected to grow by 4% each
year for the next three years. After that the company will never pay another dividend ever again. If your
required return on the stock investment is 10%, what should the stock sell for today?
1.
$7.46
2.

$15.63

3.

$28.91

4.

$46.33
10 points

1.

QUESTION 8
Miller Juice, Inc. just paid a $3 dividend. The company is expected to pay a $3.50 dividend next
year and a $4 dividend in two years. After that, dividends are expected to grow at 5% forever. If investors
require a return of 12% on the investment, what should Miller Juice stock sell for today?
1.
$60.00
2.

$49.63

3.

$54.15

4.

$57.15
10 points

QUESTION 9

1.

Nicks Incorporated just paid a $0.75 dividend. You estimate the following cash flows for Nicks
Incorporated: D1=$0.83, D2=$0.87, D3=$0.96, and P3=$27.40. If the required return to hold Nicks stock
is 15.1%, what is the price today for Nicks stock?
1.
$18.31
2.

$20.35

3.

$18.85

4.

$19.98
10 points

QUESTION 10
An analyst has predicted the free cash flows for Normaltown Corporation for the next four years:
YEAR
FCF
2004
$10 million
2005
$15 million
2006
$22 million
2007
$29 million
2.
After 2007, the free cash flows are expected to grow at an annual rate of 5%. The weighted
average cost of capital for Normaltown is 12%. If the market value of the firms debt is $100 million, find
the value of the firms equity.
$213.00 million
1.

$271.20 million
$201.81 million
$231.43 million