Accounting and Finance Homework help: 20 Finance Questions - 1) An individual has $15,000 invested in a stock with a beta of 0.6 and another $45,000 invested in a stock with a beta of 1.2.

20 Finance Questions

1) An individual has $15,000 invested in a stock with a beta of 0.6 and another $45,000 invested in a stock with a beta of 1.2. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places.

2) Wilson Wonders's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 7%. The bonds sell at a price of $985. What is their yield to maturity? Round your answer to two decimal places. ______%

3) Ace Industries has current assets equal to $6 million. The company's current ratio is 2.0, and its quick ratio is 1.5.

i) What is the firm's level of current liabilities? $_____million

ii) What is the firm's level of inventories? $____million

4) A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

5) An investor recently purchased a corporate bond which yields 8%. The investor is in the 40% combined federal and state tax bracket. What is the bond's after-tax yield? Round your answer to two decimal places.

6) While Mary Corens was a student at the University of Tennessee, she borrowed $12,000 in student loans at an annual interest rate of 9.90%. If Mary repays $1,500 per year, how long (to the nearest year) will it take her to repay the loan? _______years

7) Suppose rRF = 3%, rM = 10%, and rA = 13%.

Calculate Stock A's beta. Round your answer to two decimal places _____

If Stock A's beta were 1.2, then what would be A's new required rate of return? Round your answer to two decimal places. _______

8) The exercise price on one of Flanagan Company's options is $16, its exercise value is $23, and its time value is $7. What are the option's market value and the price of the stock?

Market value______

Price of the stock______

9) You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond's yield to maturity? Round your answer to two decimal places. _______%

10)A company has an EPS of $2.00, a cash flow per share of $3.15, and a price/cash flow ratio of 9.0. What is its P/E ratio? Round your answer to two decimal places.

11) What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 8% of par, and a current market price of (a) $50, (b) $82, (c) $117, and (d) $147? Round the answers to two decimal places.

a)___ b)___ c)___ d)___

12) What is the present value of a security that will pay $25,000 in 30 years if securities of equal risk pay 4% annually? Round your answer to the nearest cent $______

13)Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $3 at the end of each year. The preferred stock sells for $60 a share. What is the stock's required rate of return? Round the answer to two decimal places.

14 Thress Industries just paid a dividend of $2.25 a share (i.e., D0 = 2.25). The dividend is expected to grow 5% a year for the next 3 years and then at 14% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to the nearest cent.

a) D1 = $ ____ b) D2 = $--------- c) D3 =$---------- d) D4 =$---------

15) You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 0.95. You are considering selling $100,000 worth of one stock with a beta of 0.90 and using the proceeds to purchase another stock with a beta of 1.50. What will the portfolio's new beta be after these transactions? Round your answer to two decimal places.

16) Find the following values using a financial calculator. Round your answers to the nearest cent. (Hint: Using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.)

e) An initial $500 compounded for 1 year at 4%. $

f) An initial $500 compounded for 2 years at 4%. $

g) The present value of $500 due in 1 year at a discount rate of 4%. $

h) The present value of $500 due in 2 years at a discount rate of 4%. $

17) Winston Washers's stock price is $100 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 550 million shares of common stock outstanding. What is Winston's market/book ratio? Round your answer to two decimal places._______

18 ) Assume that the risk-free rate is 6% and that the expected return on the market is 12%. What is the required rate of return on a stock that has a beta of 1.0? ___%

19) Kendall Corners Inc. recently reported net income of $4.2 million and depreciation of $546,000. What was its net cash flow? Assume it had no amortization expense. $_____

20) A call option on the stock of Bedrock Boulders has a market price of $7. The stock sells for $28 a share, and the option has an exercise price of $25

a share.What is the exercise value of the call option? $ ________

b) What is the option's time value $________?

21) Washington-Pacific invests $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 15 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-P's expected rate of return? Round your answer to two decimal places ______%

TUTORIAL PREVIEW

Stock	Investment	Beta	Weight	Investment weight x Beta
I	15000	0.6	0.25	0.15
II	45000	1.2	0.75	0.9
	60000	Portfolio Beta =		1.05

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20 Finance Questions - 1) An individual has $15,000 invested in a stock with a beta of 0.6 and another $45,000 invested in a stock with a beta of 1.2.