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