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Multiple choice questions on Bond Valuation and DPS.
1. The U.S. Treasury offers to sell you a bond for $613.81. No payments will be made until the bond matures 10 years from now, at which it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?
a. 5.91%
b. 6.71%
c. 7.10%
d. 5.59%
e. 5.00%
2. Temple square Inc. reported that its retained earnings for 2005 were $490,000. In its 2006 financial statements, it reported $60,000 of net income, and it ended 2006 with $510,000 of retained earnings. How much were paid as dividends to shareholders during 2006?
a. $20,000
b. $25,000
c. $30,000
d. $35,000
e. $40,000
3. Collins Inc's latest net income was $1 million, and it had 200,000 shares outstanding. The company wants to pay out 40% of its income. What dividend per share should the company declare?
a. $1.60
b. $1.70
c. $1.80
d. $1.90
e. $2.00
Suppose England raised its corporate tax rate by 1 percentage point from 40% to 41%. How would this increase affect the economics of a U.S.-U.K. foreign expansion project?
Wrenn Corp. has 5.6 million shares outstanding, interest expenses of $4.4 million, and depreciation expenses of $3.7 million. What is Wrenn's operating income if the dividend per share is $0.80 and the dividend payout ratio is 35%?
A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. Under what circumstances does the price of the call equal the price of th..
a 10 year annuity pays $5,000 monthly, in arrears. If the required return is 9% APR compounnded monthly for the first 4 years, followed by 6% APR compounded monthly thereafter, what is the present value of the annuity?
Suppose our corporation has entered into written contracts with the call center in Fabulous County, Florida. Recently, the call center has not been paying for your company's services.
Describe what gain is recognized in the accounting year January 1 to December 31, 2010? Each contract is on 1000 barrels of oil.
At the end of the year, net fixed assets were $21,140, current assets were $3,440, and current liabilities were $2,080. The tax rate for 2014 was 35 percent.
Reagan Corp. has reported a net income of $805,700 for the year. The company's share price is $13.19, and the company has 318,290 shares outstanding. Compute the firm's price-earnings ratio.
The Asian financial crisis of 1997-98 started with devaluation of the Thai baht in July 1997 and was followed by financial panic that spread to Indonesia, Malaysia, the Philipines & South Korea
Expected return on the market portfolio is 17.7% and risk free rate is 4.1%. Determine the expected return on Edward Jones stock
Discuss the lower bound for option prices and the put-call parity with and without dividend yields; and explain why.
The company's dividends are expected to grow at a constant rate of 5.5% indefinitely. If the required rate of return on this stock is 17.5%, compute the current value per share of Linen Supply co. Stock.
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