Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,600. What interest rate would you earn if you bought this bond at the offer price?

What is the ROE for a firm with a times interest earned ratio of 2, a tax liability of $1 million, and interest expense of $1.5 million if equity equals $1.5 million?

The slope of the line fitted to a plot of a stock’s returns versus the market’s returns measures the:

How much should you pay for a $1,000 bond with 10% coupon, annual payments, and 5 years to maturity if the interest rate is 12%?

The benefits of portfolio diversification are highest when the individual securities have returns that:

Part 2: Quantitative ProblemsDo not answer more than 5 problem questions (only the first 5 questions will be counted).All non-MC quantitative questions require showing your work for full credit all answers must be legible to receive credit. Partial credit is awarded.All rate problems must be carried a minimum of 5 decimal places and final answers must be in % form.Round all final answers for $ problems to the nearest cent.

Which of the following is not typically considered a function of financial intermediaries?

Potter’s Farms is new entrant into the dairy business. They are a fast-growing business that is opening up new locations nationwide. Analysts forecast the following free cash flows (in millions) shown below for the next 3 years, after which FCF is expected to grow at a constant 5% rate. Potter’s WACC is 7.5%.  Year                     1                           2                           3            FCF                    -120                      180                        305a) What is Potter’s horizon value?b) What is the firm’s market value today?c) Suppose Potter’s has $74.3 million in debt, $37.4 million in preferred stock, and 45 million shares of common stock outstanding. The firm has no non-operating assets since they rent all their locations. What is your estimate of the current price per share?

The slope of the security market line equals:

A furniture store is offering free credit on purchases over $1,000. You observe that a big-screen television can be purchased for nothing down and $4,000 due in one year. The store next door offers an identical television for $3,650 but does not offer credit terms. Which statement below best describes the cost of the “free” credit?