FIN 5203 – Financial Management
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit
FIN 5203 - Financial Management
Final Exam Review
1. Your firm is interested in purchasing an asset using a loan and savings combination. The asset
costs $200,000 and you plan to pay 27% of that cost with your own savings. If the loan payments are monthly for five years and the APR is 5.40%, what will be your monthly loan payments?
a. $2,652
b. $2,688
c. $2,720
d. $2,754
e. $2,782
2. You area senior analyst of a mutual fund, and you are analyzing a publicly listed stock. The stock just paid a dividend of $2.40 this morning. You expect the dividends to grow at 5% per year. If
the stock price is $52.50 today, what will be the price of this stock at the end of Year 2?
a. $56.92
b. $57.20
c. $57.88
d. $58.36
e. $58.95
3. You bought a 20-year annual coupon bond two years ago. The coupon rate of the bond is 4%,
the (initial) YTM was 5.75%, and the face value of the bond is $1,000. Today, you sold the bond (right after the second coupon payment). Today’s YTM is 5.92%. If you reinvested your coupons at the initial YTM, what is your holding period return (HPR)?
a. 14.03%
b. 12.35%
c. 10.99%
d. 9.81%
e. 9.15%
4. Imagine that you have an income of $70,000 this year and $95,000 next year. The market
interest rate is 6% pa. There is an investment project, which requires an investment of $42,000 today and it offers $45,500 next year. Considering the information given above, what is the
maximum consumption you can achieve next year?
a. $168,500
b. $169,250
c. $169,880
d. $170,180
e. $170,720
5. Imagine a project with an initial investment of $430,000. The project offers FCF of $0 for the first two years. In Year 3, the FCF increases to $110,000. Starting from Year 4, the FCF will grow 5%
per year. If the discount rate is 9.3% pa and the project is expected to last 10 years, what is the NPV of the project?
a. $155,672
b. $158,097
c. $156,405
d. $159,158
e. $154,910
6. You have $100,000 to invest. You put $40,000 into stock A and the rest into stock B. The
expected returns of stock A and stock B are 10.9% and 13.4%, respectively. The standard
deviations of stock A and stock B are 8.5% and 11%, respectively. If the correlation between these two stocks’ returns is 0.27, what are the expected return and risk of your portfolio?
a. E(Rp) = 12.40%, StDev(Rp) = 8.20%
b. E(Rp) = 12.40%, StDev(Rp) = 8.66%
c. E(Rp) = 12.40%, StDev(Rp) = 9.03%
d. E(Rp) = 12.15%, StDev(Rp) = 7.80%
e. E(Rp) = 12.15%, StDev(Rp) = 8.54%
7. The CFO of Firm X is trying to determine their WACC and asked your help with this task.
According to the CFO, they have 14M shares outstanding with the market price of $67. The cost of equity is 12% pa. They also have 900,000 units of zero-coupon bonds (ZCB) outstanding. The ZCB has 15 years left to maturity, currently trading at $495, and the face value of $1,000. If the corporate tax rate is 20%, what is the WACC of Firm X?
a. 9.10%
b. 9.37%
c. 9.52%
d. 8.98%
e. 9.25%
8. Imagine a project with the initial investment of $122M. The FCF in the first year is $25M. The
FCFs will grow at 10% per year until Year 4. After that, the growth rate will be zero until Year 10. If the discount rate is 8.7% pa, please calculate the profitability index (PI) and payback period
(PBP) of this project?
a. PI = 1.652, PBP = 4.18 years
b. PI = 1.433, PBP = 4.18 years
c. PI = 1.652, PBP = 4.73 years
d. PI = 1.433, PBP = 4.73 years
9. Imagine a stock with the following information: The standard deviation of this stock’s excess
return is 0.175. The standard deviation of market portfolio’s excess return is 0.096. The
correlation between these two return series is 0.40. We also know that the risk-free rate is
2.90% and the market portfolio return is 10.1%. If the (average) actual return of this stock is 9% pa, what is the alpha of this stock?
a. 0.65%
b. 0.75%
c. 0.85%
d. 0.95%
e. 0.55%
2023-12-18