Question
1
6.70%
7.40%
Day 
1 
2 
3 
4 

Advances 
1023 
12 45 
2460 
2 50 9 

Declines 
2334 
20 04 
1178 
9 80 

Volume Advancing(m) 
214349 
225066 
666012 
679332 

Volume Declining(m) 
616678 
555010 
198058 
172311 

Yield on Top Rated bond 
6.80% 
6.70% 
6.60% 

Yield on Intermediategrade bond 
7.40% 
7. 50% 
7.60% 
What is the trin ratio for day 1?(sample answer: 1.
35
)
What is the trin ratio for day 4? (sample answer: 1.35)
Does the change in the trin ratio from day 1 to day 4 show a bullish or bearish trend? (sample answer: bullish or bearish)
Question 2
As a financial analyst at Wells Fargo, you are analyzing how the change in yield impacts the bond price. A bond has a duration of 11 years, a yield of
10%
, a convexity of 140, and a market price of $1,000. Suppose the market yield increases by 60 basis points.
What is the percentage change in the bond’s price by the duration only formula? (sample answer: 2.25% or 2.25%)
What is the bond price after the yield change predicted by the duration only formula? (sample answer: $1050.65)
What is the percentage change in the bond’s price predicted by the duration with convexity formula? (sample answer: 2.25% or 2.25%)
What is the bond price after the yield change predicted by the duration with convexity formula? (sample answer: $1050.65)
Question 3
You have collected the following cash flow data of Herman Miller Office Furniture for the year ended December 31, 2019
Sale of a used Bus 
45450 
Cash dividend 
90000 
Purchase of land 
28280 
Interest payment on debt 
26 260 
Cash Payment on Salary 
90900 
Purchase of a New Drilling machine 
76760 
Purchase of New Wood working machine 
60000 
Repurchase of stock 
7 500 0 
Cash payments to Vendor 
161600 
Cash collections from customers 
393900 
Cash at the beginning of the year 
400 000 
Please answer the following questions:
a . What is the net cash provided by or used in operating activities?(sample answer: $135,000 or $135,000)
b . What is the net cash provided by or used in investing activities? (sample answer: $135,000 or $135,000)
c . What is the net cash provided by or used in financing activities? (sample answer: $135,000 or $135,000)
d . What is the cash at the end of the year? (sample answer: $135,000 or $135,000)
Question 4
You are a financial analyst at Bank of America and you have collected following information for Lotus Tech Company. The company has beta of 1.5 and a ROE of 20%. The dividend payout ratio is 50%. Last twelve month earnings were $4 per share. The annual dividend was just paid. The consensus estimate of the coming year’s market return is 11%, and Tbills currently offer a
8%
return.
(keep two decimal places please.)
a. What is the required rate of return of the stock? (input format: 15.32%)
b. What is the growth rate of the stock? (input format: 15.32%)
c. What is the intrinsic value of the stock? (input format: $15.32)
d. What is PVGO of the stock? (input format: $15.32)
e. Suppose your research convinces you that company will announce momentarily that it will immediately change its dividend payout ratio to 75%. Find the intrinsic value of the stock. (input format: $15.32)
QUESTION 5
Suppose you are an analyst in pharmaceutical industry for Bank of America. You collect the following data to estimate the expected growth rate of dividends and use it as an input for valuing an oil company’s common stock.
3
Return on Assets 
10% 
Profit Margin 
8% 
Debt/Equity 

Payout Ratio 
50% 
a. The leverage ratio of this company is (sample answer: 3.50)
b. The company’s expected growth rate is (sample answer: 25.60%)
QUESTION 6
The following table lists the Income statement and Balance sheet for First American Furniture Company
30
100
I 
2020 
2021 

Revenue 
516 
6 30 

Depreciation 
30  35  
Other operating costs 
400 
480 

Income before taxes 
86 
115 

Taxes 
44 

Net income 
56 
71 

Dividends 
20  26  
Earnings per share 
0.56 
0.71 

Dividend per share 
0.2 
0.26 

Common shares outstanding (millions) 
100 
2020
2021
850
940
50
Balance Sheet 

Current assets 
350 
420 

Net property, plant, and equipment 
500 
520 

Total assets 
850 
940 

Current liabilities 
130 
150 

Longterm debt 
50  80  
Total liabilities 
180 
230 

Shareholders’ equity 
670 
710 

Total liabilities and equity 

Capital expenditures 
45  
Net Working Capital 
220 
270 
You are a financial analyst at RBC. Using the data above, you want to determine the value of First American Bank’s stock using the Free Cash Flow to Equity (FCFE) model. You believe that the company’s FCFE will grow at 40% for three years and 10% thereafter. Capital expenditures, depreciation, working capital, and net debt are all expected to increase proportionately with FCFE. The required rate of return on equity is 16%.
a. Calculate the amount of FCFE per share for the year 2021.(sample answer: $5.15)
b. Calculate Projected 2024 terminal value per share based on constant growth of 10% (sample answer: $25.15)
c. Calculate the current value of a share of the stock based on the twostage FCFE model. (sample answer: $25.15)