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Multiple Choice Questions

Please choice the correct answer.
1. A recent Bond listing in the Wall Street Journal provided the following information for RDJ Company.
Bonds Current Yield Vol
RDJ 73/4 07 8.1 169
The asking price for this bond would be calculated at:
a. $875.37
b. $1,000.00
c. $988.43
d. $1,011.65

2. Williams & Westrich stock is currently selling for $15.25 per share, and the dividend is expected to continue at 92ยข per share. Management expects the stock to grow at 8%. What is the expected rate of return if the stock is purchased for $15.25?
a. 8%
b. 6.3%
c. 14.03%
d. 10.42%

3. Which of the following would NOT be listed on the face of a bond?
a. the coupon interest rate
b. the maturity date
c. the market price of the bond
d. the Par Value

4. When the required rate of return is the coupon rate, the bond will sell at a discount.
a. less than
b. greater than
c. the same as
d. less than or greater than

5. You are thinking of buying a convertible debenture (a bond) that has a par value of $1,000. You can exchange the bond at any time for 40 shares of common stock. What is the conversion price?
a. $25 per share
b. $40 per share
c. 20 shares of common stock
d. There is no conversion price

Solution Preview

Please choose the correct answer.
1. A recent Bond listing in the Wall Street Journal provided the following information for RDJ Company. Bonds Current Yield Vol RDJ 73/4 07 8.1 169 The asking price for this bond would be calculated at:
a. $875.37 b. $1,000.00 c. $988.43 d. $1,011.65
Answer: c. $988.43 Coupon rate 7 3/4= 7.75% Yield= 8.10% Since the coupon rate at 7.75% is slightly less than the yield at 8.10% The bond will sell at slightly less than the Par ...

Solution Summary

The solution provides answers and explanations to 5 multiple choice questions

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