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Question 15 3 pts A bond currently has a price of $980. The current yield to maturity on the bond is 8.0%. If the yield decreases by 1.2%, the price of the bond will go up to $1,020. Based on this information, the modified duration of this bond is: 10.6 years 2.5 years 3.4 years 0 7.1 years Question 16 2 pts Bilbo Inc. is expected to maintain its dividend payout ratio of 80% in the long term. The earnings per share (EPS) of the company are expected to be $0.5 next year. Earnings are expected to grow at a constant rate of 4% per year, in perpetuity. The current risk-free rate is 2%, the implied equity risk premium is 6.0%, and the estimated beta of the firm is 1.0. If the firm is currently trading in the market at a price-to-earnings ratio (P/E) of 20, which of the following statements is more likely to be correct: Bilbo is undervalued Bilbo is overvalued Bilbo is fairly priced Question 17 2 pts Consider the information below about the following three stocks: AAA, BBB and CCC: AAA BBB CCC Market Price 7 8 9 Number of Shares 10 11 12 Cash 13 14 15 Debt (market value) 16 17 18 EBITDA 19 20 21 Based on the information above, you can conclude that AAA, which is currently trading at a market price of $7, is: Undervalued in the market O Correctly priced in the market O Overvalued in the market

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