Question

34. The Part 3, Short Answer, 13 points, 1 points each Answer 'A' or "B' or AB: for each of the following. Put your answer in the column to the right. 35. Stock A has high risk. Stock B has low risk. All else equal, which has the higher required return? 36. Both A and B took out 30-year mortgages. A had a payment of $2000. B had a payment of $2200. All else equal, who borrowed more money? 37. Both A and 8 took out 30-year mortgages. A paid his off in 28 years. B paid hers off in 25 years. All else equal, who paid more interest? 38. Investment A has a quarterly interest rate of 3%. Investment B has a monthly interest rate of 1%. Which investment has the higher EAR? 39. Investment A and B both pay interest of 5% per year. Investment A interest compounds quarterly, Investment B interest compounds semi-annually. You plan to invest for 5 years, which is the better investment? 40. Investment A has a future value of $600. Investment B has a future value of $500. Both have the same present value. All else equal, which one has the higher interest rate? 41. Bond A is a BBB bond, Bond B is a AAA bond. All else equal, which one will have a higher yield to maturity? 42. Bond A is a par bond and Bond B is a discount bond. All else equal, which bond has the higher coupon rate? 43. Bond A is a municipal bond and Bond B is a corporate bond. Which bond should have the higher yield to maturity? 44. Bond A makes semi-annual interest payments of $30. Bond B makes an annual payment of $50. All else equal, which one has the higher coupon rate? 45. Bond A is not callable, Bond B is callable. All else equal, which one will have the higher coupon payment? 46. Bond A is a municipal bond and Bond B is a corporate bond. If you pay a very low tax rate, which bond is most likely to be the better choice? 47. Investment A is an annuity due and Investment B is an annuity. All else equal, which one will have the higher present value? rt 4, Risk Classification, 10 points, 2 points each low are 4 news events that occurred on May 15"h 2018. Classify each of them as systematic (S) or unsystematic (U) d determine whether or not the information will cause an : increase (I) or decrease (D) in prices. 1/D S/U 48. US Homebuilder confidence climbs to 20-year high. 49. Boeing considers suspending 737 Max production after fatal crashes Holiday Shopping Season Off to Solid Start as Retail Sales Surged. 50. 51. Pfizer raised its dividend by nearly 6%. 52. Analysts upgrade Starbucks stock and raise price expectations from $90 to $94.

Answer 1

35    a

36   B

37   A

38   B

39 A

40   B

41   B

42   A

43   B

44 A

45   B

46. A

47. A