1.    Imagine a 20-year semi-annual coupon bond. This bond has the coupon rate of 3.6% and face value of $1,000. If the YTM is 4.5%, what is the price of this bond?

a.    $824.28

b.    $855.10

c.    $882.13

d.    $870.64

e.    $896.40

2.   You own a 15-year annual coupon bond. The bond’s coupon rate is 7%, face value is $1,000, and its current market price is $1,034.50. What will be the price of a 14-year zero coupon bond that has the same YTM with your bond? (The face value of this ZCB is also $1,000)

a.    $407.09

b.    $415.65

c.    $426.11

d.    $433.89

e.    $447.05

3.   You bought a 10-year annual coupon bond with the coupon rate of 5% and face value of $1,000 exactly one year ago. You sold this bond today at the current market price. If the YTM at the time of purchase was 5.8% and the YTM today is 5.3%, what is your holding period return?

a.    8.87%

b.   9.05%

c.    9.21%

d.   9.40%

e.    9.56%

4.   You are interested in a one-year annual coupon bond with the coupon rate of 4% and the face value of $1,000. The expected return is 10%. The issuer has 10% probability of default and if that happens, you only recover 50% of the promised payment. Under these circumstances, what is the default risk premium for this bond?

a.    15.79%

b.    11.45%

c.    8.72%

d.    5.79%

e.    Cannot be calculated

5.    Sample Platter Corporation (SPC) has just announced an EPS of $7. As a tradition, SPC distributes 50% of its EPS as dividends. Whatever SPC retains, it reinvests into new projects, which generates 20% annual return. If the required rate of return for SPC stock is 14% pa, what is current SPC stock price? 

a.    $102.50

b.    $87.50

c.    $96.25

d.    $94.00

e.    $85.25

6.   You just bought a stock for $125 today. You are expecting an annual dividend of $3.60 per share next year. If your annual required rate of return is 15% and your investment horizon is four years, how much do you expect to sell this stock by the end of Year 4?

a.    $201.44

b.    $197.53

c.    $195.12

d.    $192.78

e.    $188.51

7.    Imagine a stock that is expected to pay $5 per share dividend next year. The dividends are expected to grow 10% per year until the end of year 3. Following that, the growth rate will become %4 per year in perpetuity. If the required rate of return is 12.80% per year, what is the current stock price?

a.    $62.79

b.    $65.89

c.    $67.36

d.    $69.11

e.    $71.40

8.    Imagine a firm with the following free cash flows (FCF):

If the proper discount rate for this firm is 15.2%, what is the enterprise value today?

a.    $302.2M

b.    $288.2M

c.    $309.5M

d.    $283.1M

e.    $294.4M

9.    MDS Corporation has an EBITDA of $420M. It is keeping $95M in cash and it has the total debt  of $110M. The analysts believe that the proper EV/EBITDA for MDS Corporation is 6.50. If the current stock price is $46.81 per share, how many shares (of common stocks) outstanding does MDS have?

a.    54M

b.    56M

c.    58M

d.    60M

e.    62M