questions on finance

Could you answer these questions? Just short answers and show work for problems.

1. Lu is interested in Capital one Bank stock. Capital one’s earnings and dividends are expected to grow at constant rate of 7% per year for the foreseeable future. If Lu’s required rate of return is 12%, what is the intrinsic value of BEC stock if it is currently paying a dividend of $3.20.
2. Define the following:

• Current ratio

• Acid test

3- If the dividend of a stock is expected to grow for only three years at 5% annually and then 7% annually thereafter. Furthermore, assume that the investor’s required rate of return has now changed to 9%, and the dividend is $3.00, therefore, what is the intrinsic value of the stock?

4- A company’s net income is $200,000 and has 6000 shares outstanding. What is the earning per share?

5- If the company in question 6 pays a dividend s2, 000 annually. What is the dividend per share and the dividend Payout ratio?

6- What is the difference between systematic risk and unsystematic risk?

7- What are examples of systematic risk and unsystematic risk?

8- Assume that an investor has earned the following series of returns on an investment:

Year 1: 15.20%

Year 2: 9.10%

Year 3: 6.50%

Year 4: 18.30%

Calculate the Geometric mean of his returns?

9- Razak Cools purchased a 20-year junk bond for $877.36 with a stated coupon rate of 8.4%. What is the YTM for this bond if Jerry receives semiannual coupon payments and experts to hold the bond to maturity?

10- What is the value of the bond if the market interest rate is 3% and the coupon rate is 7%?

11- What is the total return of a stock investor?

12- Can you explain the concept of gap management?

13- Bond UDA is selling at par, offers an 8% coupon, and matures in 10 years. Bond UDA has a call feature that allows the bond to be called after 10 years at a price of $1,150. What is the yield to call?

14- What is the estimated change in the price of a zero coupon $1000 bond with a maturity date of 20 years when interest rates increase by 40 basis points? Assume the bond’s YTM is 6%.

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Textbook:

“Bank Management and Financial Services” by Peter Rose and Sylvia Hudgins, 2012, 9th edition: Publisher: McGraw Hill.