question archive Question 26 1 points You want to retire in 25 years
Question 26 1 points You want to retire in 25 years
Subject:FinancePrice:2.86 Bought32
Question 26 1 points You want to retire in 25 years. You currently have $200,000 saved and you believe you need $1,200,000 at retirement. What annual interest rate will you need to earn to meet your goal?
Question 27 1 points "If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to: o "decline over time, reaching par value at maturity." o "increase over time, reaching par value at maturity." be less than the face value at maturity. exceed the face value at maturity
Question 28 "If a security plots below the security market line, it is: o ignoring all of the security's specific risk. O "underpriced, a situation that should be temporary." O offering too little return to justify its risk. o "a defensive security, which expects to offer lower returns."
Question 29 1 points Suppose you purchased a stock a year ago. Today, you receive a dividend of $18 and you sell the stock for $118. If your return was 10%, at what price did you buy the stock?
Question 30 Question 3 The risk premium is 1 points 96 on stock given the following information: risk-free rate=44, market return = 154, stock Cs beta = 1,15 AMnvincinnath
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Q26)Using financial calculator to calculate the rate of Interest
Inputs: N= 25
Pv= -200,000
Fv= 1,200,000
pmt= 0
i/y= compute
we get, interest rate as 7.43%
Q27) Increase over time reaching par value at maturity
Explanation: The current yield always lies between ytm and coupon rate. In this case, as the current yield is more than coupon rate, it means that the ytm will be more than current yield. Higher ytm of bond will have lower present value and will increase over time to reach par value till maturity.
Q28) C) offering too little return to justify its risk
Explanation: if the security plots below the SML, it is considered overvalued in price because the expected return does not overcome the inherent risk.
Q29) rate of return = ending price - beginning price + dividend/ beginning price
10% = 118 - P0 + 18 / P0
0.10 P0 = 136 - P0
1.10 P0 = 136
P0 = 136 / 1.10
= $123.64
Q30) Risk premium = market return - risk free rate
= 15% - 4%
= 11%
