QUESTION 1

1. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio’s beta?

Stock	Investment	Beta
A	$50,000	0.75
B	$50,000	0.80
C	$50,000	1.00
D	$50,000	1.20
Total	$200,000
		0.956
		1.022
		0.853
		1.144
		0.938

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation’s balance sheet (book values) as of today is as follows: The bonds have a 7.7% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm’s debt?

Long-term debt (bonds, at par)	$23,500,000
Preferred stock	2,000,000
Common stock ($10 par)	10,000,000
Retained earnings	4,000,000
Total debt and equity	$39,500,000
		$17,734,265
		$23,394,137
		$18,866,239
		$16,602,290
		$19,054,902

QUESTION 3

1. Crockett Corporation’s 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.20%, the default risk premium for Crockett’s bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett’s bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What inflation premium (IP) is built into 5-year bond yields?

		2.02%
		2.49%
		2.43%
		2.11%
		2.15%

Koy Corporation’s 5-year bonds yield 9.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy’s bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy’s bonds?

		2.36%
		3.10%
		2.64%
		2.70%
		3.69%

QUESTION 5

1. Kristina Raattama holds a $200,000 portfolio consisting of the following stocks. The portfolio’s beta is 0.875. If Kristina replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio’s new beta be?

Stock	Investment	Beta
A	$50,000	0.50
B	50,000	0.80
C	50,000	1.00
D	50,000	1.20
Total	$200,000
		1.07
		1.13
		1.18
		1.24
		1.30

QUESTION 6

1. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.50%. Using the SML, what is the firm’s required rate of return?

		10.85%
		15.53%
		13.39%
		10.31%
		14.86%

QUESTION 7

1. Mulherin’s stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)

		10.36%
		10.62%
		10.88%
		11.15%
		11.43%

QUESTION 8

1. Kay Corporation’s 5-year bonds yield 6.20% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Kay’s bonds is DRP = 1.30% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay’s bonds?

		0.52%
		0.61%
		0.38%
		0.50%
		0.56%

5 points

QUESTION 9

1. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio’s beta?

Stock	Investment	Beta
A	$50,000	0.95
B	$50,000	0.80
C	$50,000	1.00
D	$50,000	1.20
Total	$200,000
		0.988
		1.215
		1.155
		1.234
		1.225

5 points

QUESTION 10

1. Grossnickle Corporation issued 20-year, noncallable, 8.1% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

		$1,132.57
		$1,223.69
		$1,301.80
		$1,353.87
		$1,314.82

QUESTION 11

1. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 13.25%. Using the SML, what is the firm’s required rate of return?

		10.20%
		13.03%
		14.50%
		12.29%
		11.18%

5 points

QUESTION 12

1. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

		$1,069.75
		$698.06
		$1,096.95
		$906.57
		$688.99

5 points

QUESTION 13

1. Kollo Enterprises has a beta of 0.82, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Kollo’s required rate of return?

		6.73%
		6.64%
		9.30%
		9.56%
		8.85%

QUESTION 14

1. Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market’s required rate of return is 9.50%, the risk-free rate is 7.00%, and the Fund’s assets are as follows:

Stock	Investment	Beta
A	$200,000	1.50
B	$300,000	-0.50
C	$500,000	1.25
D	$1,000,000	0.75
		8.91%
		10.06%
		6.77%
		8.64%
		10.42%

5 points

QUESTION 15

1. Schnusenberg Corporation just paid a dividend of D = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company’s beta is 0.85, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company’s current stock price?

		$22.16
		$26.54
		$25.77
		$29.37
		$27.83

5 points

QUESTION 16

1. Kelly Inc’s 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly’s bonds is DRP = 0.40%, the liquidity premium on Kelly’s bonds is LP = 2.6% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?

		0.38%
		0.50%
		0.40%
		0.59%
		0.56%

5 points

QUESTION 17

1. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio’s beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.80. What will the portfolio’s new beta be?

		1.286
		1.255
		1.224
		1.194
		1.165

QUESTION 18

1. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio’s beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 2.50. What will the portfolio’s new beta be?

		1.20
		1.152
		1.308
		0.912
		1.008

5 points

QUESTION 19

1. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company’s beta is 1.45, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company’s current stock price?

		$20.92
		$22.18
		$19.87
		$18.20
		$21.34

5 points

QUESTION 20

1. Grossnickle Corporation issued 20-year, noncallable, 6.3% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

		$1,136.58
		$950.79
		$1,289.58
		$1,049.15
		$1,092.86Click here to have a similar paper done for you by one of our writers within the set deadline at a discounted

QUESTION 1

1. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio’s beta?

Stock	Investment	Beta
A	$50,000	0.75
B	$50,000	0.80
C	$50,000	1.00
D	$50,000	1.20
Total	$200,000
		0.956
		1.022
		0.853
		1.144
		0.938

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation’s balance sheet (book values) as of today is as follows: The bonds have a 7.7% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm’s debt?

Long-term debt (bonds, at par)	$23,500,000
Preferred stock	2,000,000
Common stock ($10 par)	10,000,000
Retained earnings	4,000,000
Total debt and equity	$39,500,000
		$17,734,265
		$23,394,137
		$18,866,239
		$16,602,290
		$19,054,902

QUESTION 3

1. Crockett Corporation’s 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.20%, the default risk premium for Crockett’s bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett’s bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What inflation premium (IP) is built into 5-year bond yields?

		2.02%
		2.49%
		2.43%
		2.11%
		2.15%

Koy Corporation’s 5-year bonds yield 9.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy’s bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy’s bonds?

		2.36%
		3.10%
		2.64%
		2.70%
		3.69%

QUESTION 5

1. Kristina Raattama holds a $200,000 portfolio consisting of the following stocks. The portfolio’s beta is 0.875. If Kristina replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio’s new beta be?

Stock	Investment	Beta
A	$50,000	0.50
B	50,000	0.80
C	50,000	1.00
D	50,000	1.20
Total	$200,000
		1.07
		1.13
		1.18
		1.24
		1.30

QUESTION 6

1. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.50%. Using the SML, what is the firm’s required rate of return?

		10.85%
		15.53%
		13.39%
		10.31%
		14.86%

QUESTION 7

1. Mulherin’s stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)

		10.36%
		10.62%
		10.88%
		11.15%
		11.43%

QUESTION 8

1. Kay Corporation’s 5-year bonds yield 6.20% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Kay’s bonds is DRP = 1.30% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay’s bonds?

		0.52%
		0.61%
		0.38%
		0.50%
		0.56%

5 points

QUESTION 9

1. Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio’s beta?

Stock	Investment	Beta
A	$50,000	0.95
B	$50,000	0.80
C	$50,000	1.00
D	$50,000	1.20
Total	$200,000
		0.988
		1.215
		1.155
		1.234
		1.225

5 points

QUESTION 10

1. Grossnickle Corporation issued 20-year, noncallable, 8.1% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

		$1,132.57
		$1,223.69
		$1,301.80
		$1,353.87
		$1,314.82

QUESTION 11

1. Nagel Equipment has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 13.25%. Using the SML, what is the firm’s required rate of return?

		10.20%
		13.03%
		14.50%
		12.29%
		11.18%

5 points

QUESTION 12

1. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

		$1,069.75
		$698.06
		$1,096.95
		$906.57
		$688.99

5 points

QUESTION 13

1. Kollo Enterprises has a beta of 0.82, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Kollo’s required rate of return?

		6.73%
		6.64%
		9.30%
		9.56%
		8.85%

QUESTION 14

1. Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market’s required rate of return is 9.50%, the risk-free rate is 7.00%, and the Fund’s assets are as follows:

Stock	Investment	Beta
A	$200,000	1.50
B	$300,000	-0.50
C	$500,000	1.25
D	$1,000,000	0.75
		8.91%
		10.06%
		6.77%
		8.64%
		10.42%

5 points

QUESTION 15

1. Schnusenberg Corporation just paid a dividend of D = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company’s beta is 0.85, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company’s current stock price?

		$22.16
		$26.54
		$25.77
		$29.37
		$27.83

5 points

QUESTION 16

1. Kelly Inc’s 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly’s bonds is DRP = 0.40%, the liquidity premium on Kelly’s bonds is LP = 2.6% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?

		0.38%
		0.50%
		0.40%
		0.59%
		0.56%

5 points

QUESTION 17

1. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio’s beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.80. What will the portfolio’s new beta be?

		1.286
		1.255
		1.224
		1.194
		1.165

QUESTION 18

1. You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio’s beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 2.50. What will the portfolio’s new beta be?

		1.20
		1.152
		1.308
		0.912
		1.008

5 points

QUESTION 19

1. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company’s beta is 1.45, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company’s current stock price?

		$20.92
		$22.18
		$19.87
		$18.20
		$21.34

5 points

QUESTION 20

1. Grossnickle Corporation issued 20-year, noncallable, 6.3% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

		$1,136.58
		$950.79
		$1,289.58
		$1,049.15
		$1,092.86Click here to have a similar paper done for you by one of our writers within the set deadline at a discounted