Question Details

Bill has below portfolio consists of two stocks 



1.	A 15-year bond with a face value of $1,000 currently sells for $850.  Which of the following statements is CORRECT?

a.	The bond- coupon rate exceeds its current yield.
b.	The bond- current yield exceeds its yield to maturity.
c.	The bond- yield to maturity is greater than its coupon rate.
d.	The bond- current yield is equal to its coupon rate.
e.	If the yield to maturity stays constant until the bond matures, the bond- price will remain at $850.	
	
2.	Taussig Corp.'s bonds currently sell for $1,150.  They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,067.50.  Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future.  Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds?

a.	3.42%
b.	3.60%
c.	3.79%
d.	3.99%
e.	4.20%
	3.	Bill has below portfolio consists of two stocks; Blue Ocean, Inc. and Red Ocean Corp. He invested 75% in Blue Ocean, Inc. and the rest in Red Ocean Corp. 
	
Market Condition	Probability	Blue Ocean, Inc.	Red Ocean Corp.
Strong	0.20	38%	53%
Normal	0.35	23%	30%
Weak	0.45	-30%	-38%
	
	Based on the information, calculate expected rate of return of (1) Blue Ocean, Inc., (2) Red Ocean Corp., and (3) portfolio.

a.	1.80%,     2.78%,     1.54%
b.	2.15%,     4.00%,     2.61%
c.	3.69%,     4.19%,     3.15%
d.	4.19%,     5.16%,     3.82%
e.	5.16%,     5.49%,     4.42%
4.	Below table describes historically realized returns on Towson, Inc.
		
	2005	2006	2007	2008	2009
Stock Return	12.50%	8.50%	15.00%	21.00%	6.50%
	
	Calculate (1) average realized return, and  coefficient of variation. (Hint: standard deviation is 5.71%)

a.	12.70%,     0.48
b.	25.40%,     0.55
c.	31.75%,     0.69
d.	39.37%,     0.72
e.	40.18%,     0.84
5.	Limitless Energy, Inc. is considering to issue 8.8% semi-annual coupon bonds with 15 years to maturity. The bonds are selling at $965.75 with a par value of $1,000. What rate of return are investors expected to earn?

a.	4.61%
b.	9.24%
c.	9.05%
d.	8.79%
e.	7.90%



Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help