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# FIN 534 MIDTERM 2

FIN 534 MIDTERM 2.

·         Question 1

2 out of 2 points

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 2

2 out of 2 points

You are considering two equally risky annuities, each of which pays \$15,000 per year for 20 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?

·         Question 3

2 out of 2 points

How much would Roderick have after 6 years if he has \$500 now and leaves it invested at 5.5% with annual compounding?

·         Question 4

2 out of 2 points

Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. If you invest \$2,000 in the CD, how much will you have when it matures?

·         Question 5

2 out of 2 points

Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

·         Question 6

2 out of 2 points

At the end of 10 years, which of the following investments would have the highest future value? Assume that the effective annual rate for all investments is the same and is greater than zero.

·         Question 7

2 out of 2 points

Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT?

·         Question 8

2 out of 2 points

Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings 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 9

0 out of 2 points

Which of the following statements is CORRECT?

·         Question 10

2 out of 2 points

Which of the following statements is CORRECT?

·         Question 11

2 out of 2 points

Stephenson Co.’s 15-year bond with a face value of \$1,000 currently sells for \$850. Which of the following statements is CORRECT?

·         Question 12

2 out of 2 points

Which of the following statements is NOT CORRECT?

·         Question 13

2 out of 2 points

Which of the following statements is CORRECT?

·         Question 14

2 out of 2 points

If markets are in equilibrium, which of the following conditions will exist?

·         Question 15

2 out of 2 points

How would the Security Market Line be affected, other things held constant, if the expected inflation rate decreases and investors also become more risk averse?

·         Question 16

2 out of 2 points

Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur?

·         Question 17

2 out of 2 points

Which of the following is most likely to occur as you add randomly selected stocks to your portfolio, which currently consists of 3 average stocks?

·         Question 18

2 out of 2 points

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.)

·         Question 19

2 out of 2 points

Recession, inflation, and high interest rates are economic events that are best characterized as being

·         Question 20

2 out of 2 points

Which of the following statements is CORRECT?

·         Question 21

2 out of 2 points

Which of the following statements is NOT CORRECT?

·         Question 22

2 out of 2 points

A stock just paid a dividend of D0 = \$1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

·         Question 23

2 out of 2 points

The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the following statements is CORRECT?

·         Question 24

2 out of 2 points

Which of the following statements is CORRECT?

·         Question 25

2 out of 2 points

Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

 X Y Price \$30 \$30 Expected growth (constant) 6% 4% Required return 12% 10%

FIN 534 MIDTERM 2

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