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Corporate Finance Final Exam Questions and Answers 2024
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Corporate Finance Final Exam
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Corporate Finance Final ExamBonds issued for Stainless Tubs bear a 6% coupon payable semiannually, the bonds mature in 11 years and have a $1000 future value. They currently sell for $989, what is the yield to maturity?
a) 5.87
b) 5.92
c) 6.08
d) 6.14
e) 6.20 - answer 6.14
PMT = .06(1000) = 60
N = 11 PV = -989
FV = 1000
CPT I/Y = 6.14
An 8% corporate bond pays interest semiannually issued last year. Which two are the most likely to apply to this bond?
I. structured as an interest only loan
II. current yield is equal to coupon rate
III. yield to maturity is equal to the coupon rate
IV. market price differs from the future value
a) I only
b) II only
c) II and III only
d) I and IV only
e) I, II, and IV only - answer d) I and IV only
Roadside markets has 6.75% coupon bond maturing in 10.5 years, the bond pays interest semiannually. What is the market price if the future value is $1000 and yield to maturity is 6.69%
a) $999.80
b) $999.85
c) $1003.42 d) $1004.47
e) $1007.52 - answer d) $1004.47
FV = 1000
PMT = (.0675)(1000) = 67.5
N = 10.5
I/Y = 6.69
CPT PV = -1004.47
All else constant bond sells at _________ when the coupon is ________ the yield to maturity
a) premium, less than
b) premium, equal to c) discount , less than
d) discount, higher than
e) par, less than - answer c) discount , less than
6 year, $1000 future value bond pays semiannual interests on Feb. 1st and Aug. 1st if today is Oct. 1st what will be the difference if any between clean and dirty prices
a) none
b) 1 month interest
c) 2 months interest
d) 4 moths interest
e) 5 months interest - answer c) 2 months interest
Which of the following bonds is the least sensitive to interest rate risk
a) 3 years, 4% coupon
b) 3 years, 6% coupon
c) 5 years, 6% coupon
d) 7 years, 6% coupon
e) 7 years, 4% coupon - answer b) 3 years, 6% coupon
Which of the following increase the price sensitivity of a bond to changes in interest rates
I. increase time to maturity
II. decrease time to maturity
III. increase coupon rate
IV. decrease coupon rate
a) I only
b) I and IV only c) II and III only
d) I, II, and IV only
e) I, II, III and IV - answer b) I and IV only
Bond has a future value of $1000, and is currently quoted at 98.4% The bonds they have 5% coupon. What is the current yield.
a) 4.67
b) 4.78
c) 5.08
d) 5.33
e) 5.54 - answer c) 5.08
current yield = annual cash flow / market price
annual cash flow = (1000)(.05) = 50
market price = (1000)(.984) = 984
current yield = = .0508
7% semiannual coupon bonds are callable in 2 years at $1054 what is the amount of the call premium on $1000 par value
a) $52
b) $54
c) $72
d) $84
e) $89 - answer b) $54
1054 - 1000 = 54
You own a bond with 6% annual coupon and it matures in 5 years. It is a 10 year bond that was issued at par value. Which of the following applies if the market interest rate in 5.8%
a) current yield to maturity in greater than 6%
b) current yield is 6%
c) the next interest payment is $30
d) the bond is currently valued at half of its issued price
e) you will realize a capital gain if the bond is sold today - answer e) you will realize a
capital gain if the bond is sold today
A computer company has 5.25% coupon bond outstanding with a current market price of $546.19, the yield to maturity is 16.28 and the future value is $1000. If interest is paid
semiannually, how many years until the bonds mature
a) 6.64
b) 7.08
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