The document contains 5 multiple choice questions related to finance concepts: 1) Calculating the conversion premium of a convertible bond 2) Calculating the return on equity (ROE) of a company 3) Calculating the total shareholders' equity of a company 4) Determining the breakeven tax rate to be indifferent between a taxable bond and municipal bond 5) Calculating the debt ratio of a company given information about its assets, notes payable, and long-term debt

1. _____ 1.) A convertible bond sells for $860 and has a conversion ratio of 40. If the stock price of
the
company is currently $18, what is the percent conversion premium for the bond?
A.) 0%
B.) 5.88%
C.) 16.28%
D.) 19.44%
E.) None of the above
_____ 2.) A company has a tax burden ratio of 0.4, a compound leverage factor of 0.6, a return on
sales of 0.9, a leverage ratio of 0.7, and an asset turnover of 0.3. What is the ROE for the
company?
A.) 2.90%
B.) 4.54%
C.) 6.48%
D.) 11.4%
E.) None of the above
_____ 3.) A company reports $600 million in total current assets, $300 million in total long-term
assets, $500 million in total liabilities, and $300 million in current liabilities. What is the total
shareholders
equity for the company?
A.) $100 million
B.) $400 million
C.) $500 million
D.) $1.7 billion
E.) None of the above
_____ 4.) You are in the 24% federal tax bracket. You are offered a taxable bond with a yield of
7.8%, and a municipal bond with a yield of 6.2%. What is the breakeven federal tax rate where you
are indifferent regarding purchasing the taxable bond or the municipal bond? Should you buy the
municipal bond or the taxable bond?
A.) 20.51% breakeven tax bracket; you should buy the municipal bond
B.) 20.51% breakeven tax bracket; you should buy the taxable bond
C.) 30.67% breakeven tax bracket; you should buy the municipal bond
D.) 30.67% breakeven tax bracket; you should buy the taxable bond
E.) None of the above
_____ 5.) A company has $80 million in total assets, $15 million in notes payable, and $50 million
in
long-term debt. What is the debt ratio of the company?
A.) 18.8%
B.) 62.5%
C.) 81.3%
D.) None of the above