1. Tom O’Brien has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio\u2019s beta? <\/p>\n
(Points : 2) <\/p>\n
1.17<\/p>\n
1.23<\/p>\n
1.29<\/p>\n
1.35<\/p>\n
Question 2. 2. Maxwell Inc.’s stock has a 50% chance of producing a 25% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is the firm’s expected rate of return? (Points : 2)<\/p>\n
9.41%<\/p>\n
9.65%<\/p>\n
9.90%<\/p>\n
10.15%<\/p>\n
Question 3. 3. Moerdyk Company’s stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm’s required rate of return?<\/p>\n
(Points : 2)<\/p>\n
11.36%<\/p>\n
11.65%<\/p>\n
11.95%<\/p>\n
12.25%<\/p>\n
Question 4. 4. Quigley Inc.’s bonds currently sell for $1,080 and have a par value of $1,000. They pay a $100 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,125. What is their yield to maturity (YTM)? <\/p>\n
8.56%<\/p>\n
9.01%<\/p>\n
9.46%<\/p>\n
9.93%<\/p>\n
Question 5. 5. A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? (Points : 2)<\/p>\n
If the yield to maturity remains constant, the bond\u2019s price one year from now will be higher than its current price.<\/p>\n
The bond is selling below its par value.<\/p>\n
The bond is selling at a discount.<\/p>\n
If the yield to maturity remains constant, the bond\u2019s price one year from now will be lower than its current price.<\/p>\n
Question 6. 6. Risk-averse investors require higher rates of return on investments whose returns are highly uncertain, and most investors are risk averse. (Points : 2)<\/p>\n
True<\/p>\n
False <\/p>\n
Question 7. 7. Sinking funds are devices used to force companies to retire bonds on a scheduled basis prior to their maturity. Many bond indentures allow the company to acquire bonds for a sinking fund by either purchasing bonds in the market or selecting the bonds to be acquired by a lottery administered by the trustee through a call at face value. (Points : 2)<\/p>\n
True<\/p>\n
False <\/p>\n
Question 8. 8. Which of the following statements is CORRECT? (Points : 2)<\/p>\n
All else equal, senior debt generally has a lower yield to maturity than subordinated debt.<\/p>\n
An indenture is a bond that is less risky than a mortgage bond.<\/p>\n
The expected return on a corporate bond will generally exceed the bond’s yield to maturity.<\/p>\n
If a bond\u2019s coupon rate exceeds its yield to maturity, then its expected return to investors exceeds the yield to maturity<\/p>\n
Question 9. 9. Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio? (Points : 2)<\/p>\n
Variance; correlation coefficient.<\/p>\n
Standard deviation; correlation coefficient.<\/p>\n
Beta; variance.<\/p>\n
Coefficient of variation; beta.<\/p>\n
Question 10. 10. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? (Points : 2)<\/p>\n
The company\u2019s bonds are downgraded.<\/p>\n
Market interest rates rise sharply.<\/p>\n
Market interest rates decline sharply.<\/p>\n
The company’s financial situation deteriorates significantly.<\/p>\n","protected":false},"excerpt":{"rendered":"
1. Tom O’Brien has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-120170","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/120170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=120170"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/120170\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=120170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=120170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=120170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}