Question: Rhett purchased a 13%, zero-coupon bond

> The average daily net transaction accounts of a local bank during the most recent reserve computation period is $325 million. The amount of average daily reserves at the Fed during the reserve maintenance period is $24.60 million, and the average daily v

> A mutual fund plans to purchase $500,000 of 30-year Treasury bonds in four months. These bonds have a duration of 12 years and are priced at 96-08 (32nds). The mutual fund is concerned about interest rates changing over the next four months and is consid

> City Bank has estimated that its average daily net transaction accounts balance over the recent 14-day computation period was $225 million. The average daily balance with the Fed over the 14-day maintenance period was $8 million, and the average daily ba

> Disregarding the capital conservation buffer, what is the bank’s capital adequacy level (under Basel III) if the par value of its equity is $225,000, surplus value of equity is $200,000, retained earnings is $565,545, qualifying perpetu

> What is the contribution to the asset base of the following items under the Basel III requirements? a. $10 million cash reserves. b. $50 million 91-day U.S. Treasury bills. c. $25 million cash items in the process of collection. d. $5 million UK governme

> Financial Fitness Bank reported a debt-to-equity ratio of 1.75× at the end of 2018. If the firm’s total assets at yearend were $25 million, how much of its assets are financed with debt? How much with equity?

> Third Fifth Bank has the following balance sheet (in millions), with the risk weights in parentheses. In addition, the bank has $20 million in commercial direct-credit substitute standby letters of credit to a public corporation and $40 million in 10-y

> Two depository institutions have composite CAMELS ratings of 1 or 2 and are “well capitalized.” Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Further, the institutions

> What is the bank’s risk-adjusted asset base? Data for Problem 12: A bank’s balance sheet information is shown below (in $000). On-Balance-Sheet Items Face Value $ 121,600 5,400 414,400 9,800 159,000 Cash Shor

> Dudley Bank has the following balance sheet and income statement. For Dudley Bank, calculate: a. Return on equity b. Return on assets c. Asset utilization d. Equity multiplier e. Profit margin f. Interest expense ratio g. Provision for loan loss rati

> Third Bank has the following balance sheet (in millions), with the risk weights in parentheses. The cumulative preferred stock is qualifying and perpetual. In addition, the bank has $30 million in performance-related standby letters of credit (SLCs) to

> Onshore Bank has $20 million in assets, with risk-adjusted assets of $10 million. CET1 capital is $500,000, additional Tier I capital is $50,000, and Tier II capital is $400,000. How will each of the following transactions affect the value of the CET1, T

> Megalopolis Bank has the following balance sheet and income statement. For Megalopolis, calculate: a. Return on equity b. Return on assets c. Asset utilization d. Equity multiplier e. Profit margin f. Interest expense ratio g. Provision for loan loss

> A bank purchases a six-month $1 million Eurodollar deposit at an interest rate of 6.5 percent per year. It invests the funds in a six-month Swedish krona bond paying 7.5 percent per year. The current spot rate of U.S. dollars for Swedish krona is $0.18/S

> Jeff Krause purchased 1,000 shares of a speculative stock on January 2 for $2.00 per share. Six months later on July 1, he sold them for $9.50 per share. He uses an online broker that charges him $10 per trade. What was Jeff’s annualized HPR on this inve

> John Reardon purchased 100 shares of Tomco Corporation in December 2016 at a total cost of $1,762. He held the shares for 15 months and then sold them, netting $2,500. During the period he held the stock, the company paid him $3 per share in cash dividen

> Referring to Problem 13.18, assume you are using a constant-ratio plan with a rebalance trigger of speculative-to-conservative of 1.25. What action, if any, should you take in time period 2? Be specific. Problem 13.18: Using the data in the following t

> Your portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the risk-free rate 4%. Did you earn more or less than the required rate of return on your portfolio? (Use Jensen’s measure.)

> During the year just ended, Anna Schultz’s portfolio, which has a beta of 0.90, earned a return of 8.6%. The risk-free rate is currently 3.3%, and the return on the market portfolio during the year just ended was 9.2%. a. Calculate Treynor’s measure for

> Your portfolio has a beta equal to 1.3. It returned 12% last year. The market returned 10%; the risk-free rate is 2%. Calculate Treynor’s measure for your portfolio and the market. Did you earn a better return than the market given the risk you took?

> Congratulations! Your portfolio returned 11% last year, 2% better than the market return of 9%. Your portfolio’s return had a standard deviation equal to 18%, and the risk-free rate is 3%. Calculate Sharpe’s measure for your portfolio. If the market’s Sh

> Refer to the table below: Between Investor A and Investor B, which is more likely to represent a retired couple? Why? Fund A Fund B Beta 1.8 1.1 Investor A 20% 80% Investor B 80% 20%

> Three years ago, you invested in the Future Investco Mutual Fund by purchasing 1,000 shares of the fund at a net asset value of $20.00 per share. Because you did not need the income, you elected to reinvest all dividends and capital gains distributions.

> The Well-Managed Closed-End Fund turned in the following performance for the year 2016. a. Based on this information, what was the NAV-based HPR for the WMCEF in 2016? b. Find the percentage (%) premium or discount at which the fund was trading at the be

> Match the specific ratios in the left-hand column with the category in the right-hand column to which it belongs. a. Inventory turnover b. Debt-equity ratio c. Current ratio d. Net profit margin e. Return on assets f. Total asset turnover g. Price-to-ear

> You purchased 1,000 shares of Mutual Magic one year ago for $20.00 per share. During the year, you received $2.00 in dividends, half of which was from dividends on stock the fund held and half of which was from interest earned on bonds in the fund portfo

> You are considering the purchase of shares in a closed-end mutual fund. The NAV is equal to $22.50 and the latest close is $20.00. Is this fund trading at a premium or a discount? How big is the premium or discount?

> Refer to Problem 12.11. If Oh Yes was a load fund with a 2% front-end load, what would be the HPR? Problem 12.11: You invested in the no-load Oh Yes Mutual Fund one year ago by purchasing 1,000 shares of the fund at the net asset value of $25.00 per sh

> You invested in the no-load Oh Yes Mutual Fund one year ago by purchasing 1,000 shares of the fund at the net asset value of $25.00 per share. The fund distributed dividends of $1.50 and capital gains of $2.00. Today, the NAV is $26. What was your holdin

> Refer to Problem 12.9. If there were a 3% load on this fund, assuming you purchased the same number of shares, what would your rate of return be? Problem 12.9: Three years ago, you invested in the Future Investco Mutual Fund by purchasing 1,000 shares

> A $1,000 par value bond with a 7.25% coupon rate (semiannual interest) matures in seven years and currently sells for $987. What is the bond’s yield to maturity and bond equivalent yield?

> A bond is priced in the market at $1,150 and has a coupon of 8%. Calculate the bond’s current yield.

> Three years ago you purchased a 10% coupon bond that pays semiannual coupon payments for $975. What would be your bond equivalent yield if you sold the bond for current market price of $1,050?

> A 20-year bond has a coupon of 10% and is priced to yield 8%. Calculate the price per $1,000 par value using semiannual compounding. If an investor purchases this bond two months before a scheduled coupon payment, how much accrued interest must be paid t

> You have the opportunity to purchase a 25-year, $1,000 par value bond that has an annual coupon rate of 9%. If you require a YTM of 7.6%, how much is the bond worth to you?

> Given the information in Figure 6.4, answer the following questions for Abercrombie & Fitch Co. a. On what day did the trading activity occur? b. At what price did the stock sell when the market closed? c. What is the firm’s price-to-earnings ratio? What

> An investor wants to find the duration of a 25-year, 6% semiannual-pay, noncallable bond that’s currently priced in the market at $882.72, to yield 7%. Using a 50 basis point change in yield, find the effective duration of this bond. (H

> A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%. What is the modified duration of this bond?

> Assume that an investor pays $800 for a long-term bond that carries an 8% coupon. In three years, he hopes to sell the issue for $950. If his expectations come true, what yield will this investor realize? (Use annual compounding.) What would the holding

> What is the price of a zero-coupon ($1,000 par value) bond that matures in 20 years and has a promised yield of 9.5%?

> A zero-coupon bond that matures in 15 years is currently selling for $209 per $1,000 par value. What is the promised yield on this bond?

> You are evaluating an outstanding issue of $1,000 par value bonds with an 8.75% coupon rate that mature in 25 years and make quarterly interest payments. If the current market price for the bonds is $865, what is the quoted annual yield to maturity for t

> A bond is currently selling in the market for $1,098.62. It has a coupon of 9% and a 20-year maturity. Using annual compounding, calculate the yield to maturity on this bond.

> You notice in the WSJ a bond that is currently selling in the market for $1,070 with a coupon of 11% and a 20-year maturity. Using annual compounding, calculate the promised yield on this bond.

> You are considering the purchase of a $1,000 par value bond with an 6.5% coupon rate (with interest paid semiannually) that matures in 12 years. If the bond is priced to provide a required return of 8%, what is the bond’s current price?

> Buck buys a 7.5% corporate bond with a current yield of 4.8%. How much did he pay for the bond?

> Using settlement or closing prices from Figures 15.3 and 15.4, find the value of the following commodities and financial futures contracts. Figures 15.3: Figures 15.4: a. March 2013 corn b. July 2013 corn c. December 2013 corn d. December 2012 Treas

> A certain bond has a current yield of 6.5% and a market price of $846.15. What is the bond’s coupon rate?

> Nate purchased an interest-bearing security last year, planning to hold it until maturity. He received interest payments and, to his surprise, a sizable amount of the principal was paid back in the first year. This happened again in year two. What type o

> Caleb buys an 8.75% corporate bond with a current yield of 5.6%. When he sells the bond 1 year later, the current yield on the bond is 6.6%. How much did Caleb make on this investment?

> A 9%, 20-year bond is callable in 12 years at a call price of $1,090. The bond is currently priced in the market at $923.68. What is the issue’s current yield?

> You have collected the following NH-NL indicator data: Day NH-NL Indicator 1 (yesterday) 100 2 ………………………………………….……………………………………………………. 95 3 …………………………………………………..…………………………………………. 61 4 …………………………………………………..…………………………………………. 43 5 …………………………………

> At the end of a trading day you find that on the NYSE 2,200 stocks advanced and 1,000 stocks declined. What is the value of the advance-decline line for that day?

> You hear a market analyst on television say that the advance/decline ratio for the session was 1.2. What does that mean?

> Investors expect that Amalgamated Aircraft Parts, Inc., will pay a dividend of $2.50 in the coming year. Investors require a 12% rate of return on the company’s shares, and they expect dividends to grow at 7% per year. Using the dividend valuation model,

> From 2010 to 2015 Steller Strollers, Inc., has paid dividends of $1.06, $1.13, $1.21, $1.25, $1.31, and $1.38. Use an Excel spreadsheet like the template below to find Steller’s historical dividend growth rate. A B GROWTH RATE FOR

> In Table 14.2, notice that among the options expiring in one month, the option with the highest time value is the one with a strike price of $70. Likewise, among the options expiring in three months, the option with a $70 strike has more time value than

> HighTeck has an ROE of 15%. Its earnings per share are $2.00, and its dividends per share are $0.20. Estimate HighTeck’s growth rate.

> Good stuff Corporation has total equity of $500 million and 100 million shares outstanding. Its ROE is 15%. The dividend payout ratio is 33.3%. Calculate the company’s dividends per share (round to the nearest penny).

> Granger Toothpaste Corp. has total equity of $600 million and 125 million shares outstanding. Its ROE is 18%. Calculate the company’s EPS.

> AviBank Plastics generated an EPS of $2.75 over the last 12 months. The company’s earnings are expected to grow by 25% next year, and because there will be no significant change in the number of shares outstanding, EPS should grow at about the same rate.

> You’re thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E approach to value the shares. You’ve estimated that next year’s earnings should come in at about $4.00 a share. In addition, although the stock normally tr

> Consolidated Software doesn’t currently pay any dividends but is expected to start doing so in four years. That is, Consolidated will go three more years without paying dividends and then is expected to pay its first dividend (of $3 per share) in the fou

> Growth Co had sales of $55 million in 2016 and is expected to have sales of $83,650,000 for 2017. The company’s net profit margin was 5% in 2016 and is expected to increase to 8% by 2017. Estimate the company’s net profit for 2017.

> Larry and Curley are brothers. They’re both serious investors, but they have different approaches to valuing stocks. Larry, the older brother, likes to use the dividend valuation model. Curley prefers the free cash flow to equity valuation model. As it t

> Danny is considering a stock purchase. The stock pays a constant annual dividend of $2.00 per share and is currently trading at $20. Danny’s required rate of return for this stock is 12%. Should he buy this stock?

> The following data have been gathered from the financial statements of HiFly Corporation: Calculate the times interest earned ratios for 2015 and 2016. Is the company more or less able to meet its interest payments in 2016 when measured this way? 2

> Describe how, if at all, conservative and aggressive investors might use each of the following types of transactions as part of their investment programs. Contrast these two types of investors in view of these preferences. a. Long purchase b. Margin trad

> ZIPBIT common stock is selling at a P/E of 10 times trailing earnings. The stock price is $23.50. What were the firm’s earnings per share?

> A firm has $750 million in total assets, no preferred stock, and total liabilities of $300 million. There are 300 million shares of common stock outstanding. The stock is selling for $5.25 per share. What is the price-to-book ratio?

> A firm has 1 million shares of common stock outstanding with a book value of $15 per share. The firm also has total assets with a book value of $20 million. There is no preferred stock. What are the firm’s total liabilities?

> Snapgram Corporation has a net profit margin of 8%, a total asset turnover of 2.0 times, total assets of $1 billion, and total equity of $500 million. What were the company’s sales and net profit?

> P. Deen Enterprises Inc. has a total asset turnover ratio of 3.0 and a net profit margin of 9%. What is the company’s return on assets?

> West Coast Utilities had a net profit of $900 million. It has 900 million shares outstanding and paid annual dividends of $0.90 per share. What is the dividend payout ratio?

> East Coast Utilities is currently trading at $28 per share. The company pays a quarterly dividend of $0.28 per share. What is the dividend yield?

> The MedTech Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million per year. a. Compute the firm’s earnings per share (EPS). b. Assuming that th

> Lockhart’s Bookstores is trading at $45 per share. There are 280 million shares outstanding. What is the market capitalization of this company?

> Ron’s Rodents Co. has total assets of $5 million, total short- and long-term debt of $2.8 million, and $400,000 worth of 8% preferred stock outstanding. What is the firm’s total book value? What would its book value per share be if the firm had 50,000 sh

> When interest is compounded more frequently than annually, what happens to the true rate of interest? Under what condition would the stated and true rates of interest be equal? What is continuous compounding?

> An investor deposits $20,000 into a new brokerage account. The investor buys 1,000 shares of Tipco stock for $19 per share. Two weeks later, the investor sells the Tipco stock for $20 per share. When the investor receives his brokerage account statement,

> Bruce buys $25,000 of UH-OH Corporation stock. Unfortunately, a major newspaper reveals the very next day that the company is being investigated for accounting fraud, and the stock price falls by 50%. What is the percentage increase now required for Bruc

> The following table contains annual returns for the stocks of Home Depot (HD) and Lowe’s (LOW). The returns are calculated using end-of-year prices (adjusted for dividends and stock splits) retrieved from http://www.finance.yahoo.com/.

> Referring to Problem 5.6, what would happen if you constructed a portfolio consisting of assets A, B, and C, equally weighted? Would this reduce risk or enhance return? Problem 5.6: You have been asked for your advice in selecting a portfolio of assets

> Referring to Problem 5.19, assume you have a portfolio with $20,000 invested in each of investments A, B, and C. What is your portfolio beta? Problem 5.19: Assume the betas for securities A, B, and C are as shown here. Security ……………………………………………………………

> Referring to Problem 5.16, if you expected a significant market rally, would your decision be altered? Explain. Problem 5.16: You are evaluating two possible stock investments, Buyme Co. and Getit Corp. Buyme Co. has an expected return of 14% and a bet

> You are evaluating two possible stock investments, Buyme Co. and Getit Corp. Buyme Co. has an expected return of 14% and a beta of 1.0. Getit Corp. has an expected return of 14% and a beta of 1.2. Based only on this data, which stock should you buy and w

> The following table contains annual returns for the stocks of M and N. Use Excel to create a spreadsheet that calculates the average, standard deviation, and correlation coefficient for the two annual return series. Next, use the averages, standard devia

> Create an Excel spreadsheet that graphs the portfolio return and standard deviation combinations found in Problem 5.12 for Home Depot and Lowe’s. Problem 5.12: Use the table of annual returns in Problem 5.9 for Home Depot (HD) and Low

> Referring to Problem 5.29, if the risk-free rate is 2% and the market return is 7%, calculate the required return for each portfolio using the CAPM. Problem 5.29: Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same fiv

> At the beginning of the chapter you read about an analyst’s report on Advanced Micro Devices. Use an online source such as Yahoo! Finance or AMD’s own website to look up the company’s income statement for the fiscal year ending in early 2016. What was AM

> Use the table of annual returns in Problem 5.9 for Home Depot (HD) and Lowe’s (LOW) to create an Excel spreadsheet that calculates returns for portfolios that comprise HD and LOW using the following, respective, weightings: (1.0, 0.0),

> Your portfolio had the values in the following table for the four years listed. There were no withdrawals or contributions of new funds to the portfolio. Calculate your average return over the four-year period. Year Beginning Value Ending Value 2013

> A Florida state savings bond pays $1,000 when it matures seven years from now. If the state bonds are to be competitive with U.S. savings bonds, which pay 2% interest compounded annually, at what price will the state’s bonds sell?

> Using a financial calculator or spreadsheet, calculate the future value in seven years of $10,000 invested today in an account that pays a stated annual interest rate of 6%, compounded monthly.

> Congratulations! You have won the lottery! Would you rather have $1 million at the end of each of the next 20 years or $15 million today? (Assume an 8% discount rate.)

> How much should you be willing to pay for a lump sum of $10,000 five years from now if you can earn 3% every six months on other similar investments?

> Referring to Problem 4A.9, at what price would the bond sell if U.S. savings bonds were paying 4% interest compounded annually? Compare your answer to your answer to the preceding problem. Problem 4A.9: A Florida state savings bond pays $1,000 when it

> A company reported net income in 2012 of $350 million. In 2016 the company expects net income to be $446.9 million. Estimate the annual compound growth rate of net income.

> A company paid dividends of $1.00 per share in 2009 and just announced that it will pay $2.21 in 2016. Estimate the compound annual growth rate of the dividends.

> Referring to Problem 4A.19, assume you have made 10 payments. What is the balance (present value) of your loan?