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PART C
Question 1
2 out of 2 points
Wine and Roses, Inc. offers a 7% coupon bond with semi-annual
payments and a yield to maturity of 7,73%. The bonds mature in 9 years.
What is the market price of a R1 000 face value bond?
Selected Answer:
R953,28
Correct Answer:
R953,28
•
Question 2
2 out of 2 points
One year ago, you invested R3 000. Today it is worth R3 142,50. What
rate of interest did you earn?
Selected Answer:
4,75%
Correct Answer:
4,75%
•
Question 3
2 out of 2 points
Jacks Construction Co. has 80 000 bonds outstanding that are selling at
par value. Bonds with similar characteristics are yielding 8,5%. The
company also has 4 million shares of ordinary shares outstanding. The
share has a beta of 1,1 and sells for R40 a share. Treasury bills are
yielding 4% and the market risk premium is 8%. Jacks tax rate is 35%.
What is Jacks weighted average cost of capital?
Selected Answer:
10,38%
Correct Answer:
10,38%
•
Question 4
0 out of 2 points
Brad's Co. has equipment with a book value of R500 that could be sold today at a 50% discount.
Their inventory is valued at R400 and could be sold to a competitor for that amount. The
company has R50 in cash and customers owe them R300. What is the accounting value of their
liquid assets?
Selected Answer:
R1 000
Correct Answer:
R750
•
Question 5
2 out of 2 points
Bill Bailey and Sons pays no dividend at the present time. The company
plans to start paying an annual dividend in the amount of R0,30 a share
for two years commencing two years from today. After that time, the
company plans on paying a constant R1 a share dividend indefinitely.
How much are you willing to pay to buy a share if your required return is
14%?
Selected Answer:
R5,25
Correct Answer:
R5,25
•
Question 6
0 out of 2 points
On your tenth birthday, you received R100 which you invested at 4,5%
interest, compounded annually. That investment is now worth R3 000.
How old are you today?
Selected Answer:
age 77
Correct Answer:
age 87
•
Question 7
2 out of 2 points
Gillians Boutique has 850 000 shares of ordinary shares outstanding at a
market price of R16 a share. The company also has 15 000 bonds
outstanding that are quoted at 98% of face value. What weight should be
given to the ordinary shares when Gillians computes their weighted
average cost of capital?
Selected Answer:
48%
Correct Answer:
48%
•
Question 8
2 out of 2 points
Shares of the Katydid Co. are currently selling for R27,73. The last
dividend paid was R1,60 per share. The market rate of return is 10%. At
what rate is the dividend growing?
Selected Answer:
4,00%
Correct Answer:
4,00%
•
Question 9
2 out of 2 points
You hope to buy your dream house six years from now. Today your
dream house costs R189 900. You expect housing prices to rise by an
average of 4,5% per year over the next six years. How much will your
dream house cost by the time you are ready to buy it?
Selected Answer:
R247 299,20
Correct Answer:
R247 299,20
•
Question 10
2 out of 2 points
Michaels, Inc. just paid R1,40 to their shareholders as the annual
dividend. Simultaneously, the company announced that future dividends
will be increasing by 4,5%. If you require an 8% rate of return, how much
are you willing to pay to purchase one share?
Selected Answer:
R41,80
Correct Answer:
R41,80
•
Question 11
0 out of 2 points
Antonette needs R20 000 as a down payment for a house five years from
now. She earns 4% on her savings. Antonette can either deposit one
lump sum today for this purpose or she can wait a year and deposit a
lump sum. How much additional money must Antonette deposit if she
waits for one year rather than making the deposit today?
Selected Answer:
R659,04
Correct Answer:
R657,54
•
Question 12
2 out of 2 points
Katie's Boutique has zero-coupon bonds outstanding that mature in four years. The bonds have
a face value of R1 000 and a current market price of R820. What is the company's pre-tax cost of
debt?
Selected Answer:
5,09%
Correct Answer:
5,09%
•
Question 13
0 out of 2 points
The bonds offered by Leos Pumps are callable in 3 years at a quoted
price of 101. What is the amount of the call premium on a R1 000 par
value bond?
Selected Answer:
R13.33
Correct Answer:
R10.00
•
Question 14
0 out of 2 points
Weisbro and Sons shares sell for R21 a share and pays an annual
dividend that increases by 5% annually. The market rate of return on this
share is 9%. What is the amount of the last dividend paid by Weisbro and
Sons?
Selected Answer:
[None Given]
Correct Answer:
R0,80
•
Question 15
0 out of 2 points
Betâ R Bilt Bikes just announced that their annual dividend for this
coming year will be R2,42 a share and that all future dividends are
expected to increase by 2,5% annually. What is the market rate of return
if this share is currently selling for R22 a share?
Selected Answer:
[None Given]
Correct Answer:
13,5%
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