Question: 1
Joe Finn is a highly paid corporate executive who will retire in two years. Over 25 years ago, Finn invested in a portfolio of growth stocks that has performed quite well. Finn has asked his financialadviser to consider switching from stocks to high-yielding bonds. The investment issue of greatest concern in implementing this strategy will be the client's:
Question: 2
An investor buys a 15-year, 10 percent annual pay coupon bond for $1,000. He plans to hold the bond for 5 years while reinvesting the coupons at 12 percent. At the end of the 5-year period he feels he can sell the bond to yield 9 percent. What is the expected realized (horizon) yield?
Question: 3
Kruskal Meriwether is a senior research analyst with Bellwether Advisors. He has been following Crystals & Candles a publicly traded firm which makes high-quality diamond jewelry. Kruskal, after extensive interviews with senior management at Crystals, has inferred that the firm is about to take over a diamond- mining firm in South Africa at a rock-bottom price. The Crystal management has refused to explicitly confirm or deny this but Kruskal firmly believes that such a deal is in the works. He has not used any inside information; just pieced together information from various avenues to come to this conclusion. In his reports, he states, "All my research seems to indicate that Crystal & Candles is likely to buy a South African diamond producer at a bargain price. Clearly, now is the time to buy Crystal and Candles' stock." 2 weeks after his report is released, Crystal's management announces that it has no intentions of making any acquisitions in the near future. This leads to a 7% decline in Crystal's stock, causing a large decline in the account's of Kruskal's clients. Kruskal has
Question: 4
The Global Advertising Company had net income after interest but before taxes of $40,000 this year. The marginal tax rate is 40 percent, and the dividend payout ratio is 30 percent. The company can raise debt at a 12 percent interest rate. The last dividend paid by Global was $0.90. Global's common stock is selling for $8.59 per share, and its expected growth rate in earnings and dividends is 5 percent. If Global issues new common stock, the flotation cost incurred will be 10 percent. Global plans to finance all capital expenditures with 30 percent debt and 70 percent equity. What is the break point due to retained earnings being used up?
Question: 5
High payout ratios are closely correlated with which of the following attributes?
