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    Multiple Choice

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    1.Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm`s stock at the end of four years (P4) is
    I. D5 / (r-g)
    II. P0 x (1+g)4
    III. D0 x (1+g)/(r-g)

    a. I only
    b. II only
    c. I and II only
    d. I and III only
    e. I, II, and III

    2. A bond with an annual coupon of $100 originally sold at par for $1000. The current market interest rate on this bond is 9%. Assuming no change in risk, this bond would sell at a _________ in order to compensate ____________.

    a. Premiem; the purchaser for the above-market coupon rate
    b. Discount; the purchaser for the above-market coupon rate
    c. Premiem; the seller for the above-market coupon rate
    d. Discount; the seller for the above-market coupon rate
    e. Discount; the issuer for the higher cost of borrowing

    3. What happens to the value of a 4-year fixed income security promising $100 per year if the market interest rate rises form 5% to 6% per yearÉ

    a. A rise of 1% casues a drop of $4.87 in market value.
    b. A rise of 1% casues a rise of $4.87 in market value.
    c. A rise of 1% casues a drop of $8.08 in market value.
    d. A rise of 1% casues a rise of $8.08 in market value.
    e. None of the above

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    https://brainmass.com/business/accounting-for-corporations/multiple-choice-160613

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    1.Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm`s stock at the end of four years (P4) is
    I. D5 / (r-g)
    II. P0 x (1+g)4
    III. D0 x (1+g)/(r-g)

    a. I only
    b. II only
    c. I and II only
    d. I and III only
    e. I, II, and III

    Using the constant growth model, the price is given as D1/(r-g). The price in year 4 will be the dividend in year 5 and so the formula is D5/(r-g)
    The price will also increase at the same rate as the growth rate since ...

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    The solution explains some multiple choice questions in finance

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