Question

Marvin’s Interiors issued 8-year bonds 2 years ago. The bonds have a face value of $1,800, a 7.0 percent, semiannual coupon, and a current market price of $1,389. What is the pre-tax cost of debt?

Multiple Choice:

• 12.53 percent

• 13.28 percent

• 14.23 percent

• 13.79 percent

The Up and Coming Corporation's common stock has a beta of 1.4. If the risk-free rate is 3.5 percent and the expected return on the market is 13 percent, what is the company's cost of equity capital?

Multiple Choice

• 16.8%

• 17.64%

• 17.47%

• 15.96%

• 21.7%

Six months ago, you purchased 1,500 shares of ABC stock for $35.81 a share. You have received dividend payments equal to $0.70 a share. Today, you sold all of your shares for $38.95 a share. What is your total dollar return on this investment?

Multiple Choice

• $4,710

• $11,520

• $1,050

• $5,760

• $6,729

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

07.09 PEx ENG. 16 01 2000 · FX E F G H J K L M N O D FOR YTM P 2 2 B C calculator strokes first of all set C/Y = P/Y = then N = PV = PMT= FV = CPT 1/Y = 12 ( 6 X 2] 1389 -63 (1800 X 7%/2] -1800 12.53% 32 ANSWER Rm = Rf = beta = 13% 3.50% 1.4 ke = ke = ke = Rf + beta(Rm-Rf) 3.50% + 1.4(13%-3.50%) 16.8% 41 ANSWER 44 PURCHASE VALUE = PO DIVIDEND RECEIVED=D1 SALE VALUE = P1 TOTAL DOLLAR RETURN = 53715 [1500 X 35.81] 1050 (0.70 X 1500] 58425 [1500 X 38.95] 5760 (P1 + D1 - PO] 47 ANSWER 48 ... BOND PV FV Sheel choice EARWACC Sheet1 Sheet2 Sheet Sheels HERO WACC AFN manual QUE BOND MISC +