ALL WORKS MUST BE SHOWN AND DONE ON EXCEL.

1. The Beakman Corp. has $1,000 PAR bond at 5% interest. The bonds will mature in 10 years. Compute the current price of the bond if the present yield to maturity is 8%. Is this bond trading at par, discount or premium (15 POINTS)?

2. Suppose a German company issues a bond with a par value of E1,000 25 years to maturity and a coupon rate of 6% paid annually. If the yield to maturity is 5%, what is the current price of the bond? Is this bond trading at par, discount or premium (15 POINTS)?

3. Go to Morningstar.com and look up the mutual Fund Fidelity ContraFund (FCNTX) and American Funds Growth Fund of America (AGTHX). Determine what the rate of return was for the years 2015, 2016, 2017, 2018, and 2019 for both funds. Determine the average rate of return for those past 5 years for both funds. Then determine the 5-year variance and standard deviation for both mutual funds (You can use excel or written formulas). Based on your findings, explain which mutual fund you would invest in and why (15 Points).

4. Honda Motor Corp. has a beta of 1.15, the expected 5 year return on the market (S&P 500) is 11.58%, and the risk free investment (30 year US Treasury) is 2.25%. What must my expected return be for Honda (10 Points)?

5. Stock in Walmart is selling for $88 per share. You believe there is little possibility the stock will sell for less than $80 per share within one year (15 Points).

a. What is the intrinsic value of a call option with a $83 exercise price?

b. What is the intrinsic value of a call option with a $78 exercise price?

c. What is the intrinsic value of a put option with a $75 exercise price?

6. Compare and contrast the three forms of market efficiency. Which theory do you believe to be the most accurate and why (15 Points)?

7. According to Andre Shleifer, there are three conditions that will lead to market efficiency Ã¢â‚¬â€œ Rationality, Independent Deviations from Rationality, and Arbitrage. However, according to behavioral finance theories, the above conditions are not likely to hold in reality. Explain from a behavioral finance perspective, why the above three conditions are not likely to hold up in real world scenarios (15 Points)