FINA2201 Midterm2 Some Q's

A six-year, $1000 face value bond pays interest semiannually on March 1 and September 1. Assume today is November 1. What is the current difference between the bonds clean and dirty prices?

Two months interest

You want to have $2 million in real dollars in an account when you retire in 35 years. Nominal return is 9.94% and inflation rate is 3.2%. What is the real amount you must deposit each year to achieve your goal?

$16,017

Who can access Level 3 of Nasdaq’s information?

Nasdaq market makers

What is correct about the NYSE?

Exchange members must purchase trading licenses

A stock currently sells for $54.80 per share. The market required return is 14.2% while the company maintains a constant 3% growth rate in dividends. What was the most recent annual dividend per share paid on the stock?

$5.96 (54.80 = (D0×1.03)/(.142-.03))

Which market efficiency would most likely offer the greatest profit potential to an unusually skillful professional stock analyst?

Weak

The excess return is computed as the

Return on a risky security minus the risk free rate

A stock has a beta of 1.35 and an expected return of 11.05%. The risk-free rate of return is 3.25% while the inflation rate is 2.8%. What is the expected market risk premium?

$5.78

You purchased a 10-year bond at par value when it was originally issued. It has an annual coupon of 7.5% and matures five years from now. Coupons are paid semiannually. Which one of the following statements applies to the bond if the relevant market interest rate is now 6%?

You will realize a capital gain on the bond if you sell it

Today, June 15, you want to buy a bond with a quoted price of 98.64. The bond pays interest on January 1 and July 1. Which one of the following prices represents your total cost of purchasing this bond today?

Dirty price

Which one of the following statements related to capital gains is correct?

An increase in an unrealized capital gain. will increase the capital gains yield