FIN 755 Homework | Course Paper

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1) narrbegin: bavarian brewhouse div.

bavarian brewhouse dividend

bavarian brewhouse had earnings per share of $2.50 in 2004 and paid out a dividend per

share of $1.45 that same year. earnings per share are expected to be $3.25 in 2005.

narrend

if bavarian brewhouse follows a constant payout ratio dividend policy, what will be the

dividend per share in 2005?

a.$1.45

b.$1.89

c.$2.12

d.$3.25

2) narrbegin: bavarian sausage

bavarian sausage

you bought a share of bavarian sausage stock for $46.50 at the beginning of the year.

during the year the stock paid a $2.75 dividend and at the end of the year it trades at

$52.75.

narrend

refer to bavarian sausage. what is the total dollar return on your investment?

a.$9.00

b.$2.75

c.$6.25

d.$52.75

3) a bond was purchased last year for $900. the bond pays a 10% annual coupon and

has a face value of $1,000. today, the bond has a coupon yield of 8%. what is the total

return for this bond over the last year?

a.8%

b.10%

c.39%

d.50%

4) according to the black and scholes option pricing model, which of the following will

lead to an increase in the value of a call option?

a.the price of the underlying asset decreases

b.the risk free rate increases

c.the time to expiration decreases

d.none of the above

5) narrbegin: cboe

cboe

use the following information on cboe 13-week t-bill rate options to answer the

following question(s).

narrend

refer to cboe. what is the cost of the least expensive floor to protect from falling interest

rates?

1. $75 per contract

2. $0.75 per contract

3. $100 per contract

4. $1.00 per contract

6) when evaluating the secondary market based upon how the securities are traded, we

can divide the market into two segments:

a.a bull market and a bear market

b.a stock market and a bond market

c.a primary market and a secondary market

d.a broker market and a dealer market

7) which of the following statements is true?

a.when a firm performs a spin-off the total stock value of the parent firm should drop by

approximately the market value of the new public spin-off

b.a reverse lbo is also known as a second ipo

c.tracking stocks are designed to track the earnings of wholly-owned subsidiaries

d.all of the above statements are true

e.only statements (a) and (c) are true

8) working capital management:

a.involves managing the firms long-term assets, such as plant and equipment

b.requires very little in terms of people skills as it mostly involves analyzing numbers

c.deals with the firms seasonal financing, inventory needs, collecting accounts

receivable and investing surplus cash

d.all of the above

e.none of the above

9) if you were to invest $120 for two years, while earning 8% compound interest, what

is the total amount of interest that you will earn?

a.$139.97

b.$139.20

c.$19.20

d.$19.97

10) narrbegin: exhibit 22-1 liquidation

exhibit 23-1

narrend

if the company has $4,268,000 in funds to distribute to unsecured creditors, what

percentage of their claims are going to be satisfied if case ii occurs?

a.100%

b.33.83%

c.66.17%

d.46.23%

11) the risk that a government will take an action that negatively affects the values of

firms operating in that country

a.transactions exposure

b.translation exposure

c.economic exposure

d.political risk

12) you invest $10,000 in august 2004. in august 2009, the investment is worth

$12,000. what was your compound annual rate of return over the period?

a.3.09%

b.3.71%

c.4.00%

d.4.21%

13) which of the following statements is true?

a.as time passes and a bond approaches its maturity date the price will converge to par

value plus the final interest payment

b.the most important factor having an impact on a bond’s price is the current yield on

the bond

c.bond prices and interest rates move in the same direction

d.shorter-term bonds are more sensitive to changes in interest rates than longer-term

bonds.

e.none of the above statements is true

14) narrbegin: bavarian brewhouse ipo

bavarian brewhouse ipo

bavarian brewhouse is planning an ipo. under the terms of the ipo, bavarian brewhouse

will issue 8 million shares at an offer price of $25 per share. the underwriter charges an

9% underwriting fee and direct costs are estimated to be $7 million. the stock is

expected to trade at $30 at the end of the first trading day.

narrend

what is the total amount of funds raised by bavarian brew through the ipo?

a.$175 million

b.$182 million

c.$200 million

d.$150 million