FIN 390 WEEK 8 FINAL EXAM DEVRY

FIN 390 WEEK 8 FINAL EXAM DEVRY

Question 110 pts

(TCO 1) Which of the following is true about fixed-income securities?

Question 210 pts

(TCO 2) The concept of risk versus return refers to

Question 310 pts

(TCO 5) Which of the following is not true?

Question 410 pts

(TCO 3) Which of the following are or could be part of the buying, selling, and trading of corporate bonds?

Question 510 pts

(TCO 5) What is the normal yield curve shape?

(TCO 6) Portfolio diversification is all about which of the following?

Question 710 pts

(TCOs 1 and 8) What kind of securities would investors seeking a steady income probably look to?

Question 810 pts

(TCO 8) Who would normally be required to create a portfolio investment policy?

(TCO 4) Where could you find trend information about the bond market?

Question 1010 pts

(TCO 6) The yield on a corporate bond is 10%, and it is currently selling at par. The marginal tax rate is 20%. A par value municipal bond with a coupon rate of 8.50% is available. Which security is a better buy?

Question 1120 pts

(TCO 6) What is the coupon rate needed on a $1,000 face value, 6% coupon corporate bond to make it equivalent in terms of return to one whose interest rate is tax free? Assume the corporate tax rate is 40%.

Question 1220 pts

(TCO 7) What would be the expected change to a 30-year bond’s market price or value if its YTM increases to 9.4%? Its YTM is now 9%, it has an 8% annual coupon, $1,000 face value, it is currently priced at $897.26, and its duration is 8 years.

Question 1320 pts

(TCO 2) Given the data below, calculate the expected return, variance, and standard deviation of the following company. In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5%.
In an expanding economy with an expected probability of occurrence of 20%, the expected return would be 20%.
In a normal economy, expected to occur 50% of the time, the expected return would be 5%.

Question 1420 pts

(TCO 6) Calculate the five ratios for the following company info.
Income Statement                                     Balance Sheet
Revenue           10,000                                   Assets                              Liab. + OE

EBIT                   $2,000                         cash       $1,000    a/p                           $2,000

Interest              $500                           A/R       $10,000    Bonds payable    $50,000

Earnings B4 Tax $1,500                     Equip     $25,000    equity                   $84,000

EAT (at 30%)       $1,050                     Bldg    $100,000

Total   $136,000                                $136,000
– return on sales
– ROA
– ROE
– fixed asset turnover
– times interest earned

Question 1520 pts

(TCOs 1, 5, and 6) Calculate the appropriate selling price of a 30-year 5% coupon, $10,000 Treasury bond that was purchased 5 years ago. Marketplace interest rates are averaging 8%.

Question 1620 pts

(TCOs 1, 8, and 9) An investor is looking to buy a bond that currently pays $155 a year in interest (coupon rate). The current yield is 11%, and the face value is $1,000. How much will the investor have to pay for this bond?

Question 1730 pts

(TCO 5) Explain the difference between active portfolio management and passive management.