FIN 515 Devry entire course DEVRY FIN 515 Week 4 Midterm | Page 4

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CFs: $0 $1,000 $2,000 $2,000 $2,000 (Points : 10)
$5,987
$6,286
$6,600
$6,930
$7,277
(6) (TCO B) Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in
four equal installments at the end of each of the next four years. How large would
your payments be? (Points : 10)
3,704.02
$3,889.23
$4,083.69
$4,287.87
$4,502.26
(7 ) (TCO D) Which of the following statements is CORRECT? (Points : 10)
(a) If a bond is selling at a discount, the yield to call is a better measure of return
than the yield to maturity.
(b) On an expected yield basis, the expected capital gains yield will always be
positive because an investor would not purchase a bond with an expected capital
loss.
(c) On an expected yield basis, the expected current yield will always be positive
because an investor would not purchase a bond that is not expected to pay any cash
coupon interest.
(d) If a coupon bond is selling at par, its current yield equals its yield to maturity.
(e) The current yield on Bond A exceeds the current yield on Bond B; therefore, Bond
A must have
(8 ) (TCO D) Ezzell Enterprises’ noncallable bonds currently sell for $1,165. They
have a 15-year maturity, an annual coupon of $95, and a par value of $1,000. What is
their yield to maturity? (Points : 10)
6.20%
6.53%
6.87%
7.24%
7.62%
(9 ) (TCO C) Niendorf Corporation’s five-year bonds yield 6.75%, and five-year Tbonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for
five-year bonds is IP = 1.65%, the default risk premium for Niendorf’s bonds is DRP =