# questions on finance

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

- 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.
- 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.

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