### Valuation Quiz

Prepared by Pamela Peterson Drake

(1) What is the value of a bond that has a 5% coupon (paid semiannually), five years remaining to maturity, a face value of \$1,000, and is priced to yield 8%?
 a) \$676 b) \$878 c) \$1,000 d) \$1,045

(2) Suppose an investment that costs \$50,000 promised \$30,000 at the end of the third year and \$40,000 at the end of the fourth year. What is the return on this investment?
 a) 9.9% b) 15.3% c) 24.4% d) 40.0%

(3) Using the dividend valuation model, what is the value of a share of stock that has a current dividend of \$4.00 per share, has a required rate of return of 11%, and whose dividend is expected to grow at a rate of 5% per year?
 a) \$40 b) \$67 c) \$70 d) \$80

(4) What is the value of a zero coupon bond that has a \$1,000 face value and four years remaining to maturity that is priced to yield 10%?
 a) \$578 b) \$677 c) \$875 d) \$1,000

(5) What is the yield on a zero-coupon bond that is priced at 63, has five years remaining to maturity, and has a face value of \$1,000?
 a) 5.4% b) 6.3% c) 9.5% d) 10.0%

(6) What is the yield-to-maturity of a \$1,000 face value bond that has ten years remaining to maturity, an 8% coupon (paid semi-annually), and a current value of \$850.
 a) 5.0% b) 5.3% c) 10.0% d) 10.5%

(7) What is the yield-to-maturity of a bond that has a quoted price of 90, a 7% coupon (paid semiannually), a face value of \$1,000, and five years remaining to maturity.
 a) 4.5% b) 4.8% c) 9.0% d) 9.6%

(8) A bond will trade at its face value when its coupon rate is
 a) less than its yield-to-maturity b) more than its yield to maturity c) equal to its yield-to-maturity d) None of the above

(9) What is the value of a share of preferred stock that has a dividend rate of 5%, a par value of \$100, and priced to yield 6%?
 a) \$67.90 b) \$78.50 c) \$83.30 d) \$100.00

(10) What is the value of a \$1,000 face value bond that has twenty years remaining to maturity, a 10% coupon (paid semiannually), and is priced to yield 6%?
 a) \$980 b) \$1,000 c) \$1,263 d) \$1,462