This area has been wonderful. There were things I wanted to do with my class that I just couldn't figure until I found the resources here, so THNAK YOU!
I wanted to share the HTML for my first Canvas-Hack-based page.
It is a series of practice problems that allow students to click on answers to see if they are correct and see solutions.
I hope people find it useful and can adapt to their needs.
Thanks again and best regards,
John Byrd
CU Denver (john.byrd@ucdenver.edu)
Here is the HTML code.
I teach MBA finance so it is a numbers oriented page but the template can probably be adapted for lots of uses.
________________
<blockquote>
<h3>Security Valuation Practice Problems</h3>
Click on an answer to check it. <br /><br /> 1. A bond has a 6% coupon rate, matures in exactly 8 years, pays interest semi-annually and has a face value of $1,000. If current market conditions have bonds of similar risk and maturity priced to return 5%, what will this bond sell for? Hint: Is the 6% coupon a premium over current rates?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link1A" href="#dialog_for_link1A"> A. $1,000.00</a></span></strong>
<div id="dialog_for_link1A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This result requires the coupon rate to equal the current market rate.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link1B" href="#dialog_for_link1B"> B. $1,064.63</a></span></strong>
<div id="dialog_for_link1B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer doesn't include semi-annual compounding. For example, the Excel formula might have been =PV(5%,8,60,1000,0). But it needs to adjust the RATE and the NPER inputs for semi-annual compounding.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link1C" href="#dialog_for_link1C"> C. $1,065.28</a></span></strong>
<div id="dialog_for_link1C" class="enhanceable_content dialog"><strong>Correct. </strong> The Excel formula is: =PV(2.5%,16,30,1000,0)</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
2. A bond has a 6% coupon rate, matures in exactly 8 years, pays interest semi-annually and has a face value of $1,000. If current market conditions have bonds of similar risk and maturity priced to return 6%, what will this bond sell for? Hint: Is the 6% coupon a premium over current rates?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link2A" href="#dialog_for_link2A"> A. $1,000.00</a></span></strong>
<div id="dialog_for_link2A" class="enhanceable_content dialog"><strong>Correct. </strong><br /> Since the coupon rate equals the current market rate or bond will sell at par or at its face value of $1,000.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link2B" href="#dialog_for_link2B"> B. $1,064.63</a></span></strong>
<div id="dialog_for_link2B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer requires discounting at a rate lower than the market rate of 6%.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link2C" href="#dialog_for_link2C"> C. $1,105.28</a></span></strong>
<div id="dialog_for_link2C" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer requires discounting at a rate lower than the market rate of 6%.</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
3. A bond has a 6% coupon rate, matures in exactly 8 years, pays interest semi-annually and has a face value of $1,000. If its current market price is $939.53, what is this bond's yield-to-maturity? Hint: Is the yield higher or lower than the 6% coupon rate?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link3A" href="#dialog_for_link3A"> A. 5.5%</a></span></strong>
<div id="dialog_for_link3A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> Since the bond is selling at a discount the YTM must be greater than the coupon rate of 6%.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link3B" href="#dialog_for_link3B"> B. 6.4%</a></span></strong>
<div id="dialog_for_link3B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> Discounting the bond's features at this rate results in a price of $975.26 = PV(3.2%,16,30,1000,0). The correct YTM will discount the bond to the $939.53 price.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link3C" href="#dialog_for_link3C"> C. 7.0%</a></span></strong>
<div id="dialog_for_link3C" class="enhanceable_content dialog"><strong>Correct. </strong> The Excel formula is: =RATE(16,30,-939.53,1000,0,4%) = 3.5%</div>
<div class="enhanceable_content dialog">Since this is a semi-annual rate w double it to get a 7.0% annual rate.</div>
<div class="enhanceable_content dialog">We can check our answer:=PV(3.5%,16,30,1000,0)=$939.53</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
4. A bond has a 7% coupon rate, matures in exactly 8 years, pays interest semi-annually and has a face value of $1,000. Current market conditions for bonds of similar risk and maturity price these bonds to return 6%, so this bond sells for $1,062.81. If interest rates suddenly drop to 5% what will happen to the bond's price? <br />
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link4A" href="#dialog_for_link4A"> A. Decreases to $1,000<br /></a></span></strong>
<div id="dialog_for_link4A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This result requires the coupon rate to equal the current market rate.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link4B" href="#dialog_for_link4B"> B. Increases to $1,129.26<br /></a></span></strong>
<div id="dialog_for_link4B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer doesn't include semi-annual compounding. For example, the Excel formula might have been =PV(5%,8,70,1000,0). But it needs to have the RATE, PMT and the NPER inputs adjusted for semi-annual compounding.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link4C" href="#dialog_for_link4C"> C. Increases to $1,130.55</a></span></strong>
<div id="dialog_for_link4C" class="enhanceable_content dialog"><strong>Correct. </strong> The Excel formula is: =PV(2.5%,16,30,1000,0)=$1,130.55</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
5. An investor purchased a bond for $1,000 at issuance. The bond has a 6% coupon rate, matures in exactly 15 years, pays interest semi-annually and has a face value of $1,000. If the investor must sell the bond today, and current market conditions have bonds of similar risk and maturity priced to return 5%, what price will he sell the bond for?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link5A" href="#dialog_for_link5A"> A. $1,000.00</a></span></strong>
<div id="dialog_for_link5A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This result requires the coupon rate to equal the current market rate.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link5B" href="#dialog_for_link5B"> B. $1,064.63</a></span></strong>
<div id="dialog_for_link5B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer doesn't include semi-annual compounding. For example, the Excel formula might have been =PV(5%,8,60,1000,0). But it needs to adjust the RATE and the NPER inputs for semi-annual compounding.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link5C" href="#dialog_for_link5C"> C. $1,065.28</a></span></strong>
<div id="dialog_for_link5C" class="enhanceable_content dialog"><strong>Correct. </strong> The Excel formula is: =PV(2.5%,16,30,1000,0)</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
6. A bond has a 7% coupon rate, matures in exactly 17 years, pays interest semi-annually and has a face value of $1,000. Current market rates for bonds of this risk profile are 5%, so the bond should sell for $1,227.24 (You can check this). However, the bond is callable in exactly 3 years. Since the coupon rate of 7% is far above the current market rate of 5%, investors are pricing the bond as if it will be called. What price are investors paying for the bond if they will receive a call premium of $1,140 instead of the $1,000 face value and the bond is called in exactly 3 years? <br />
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link6A" href="#dialog_for_link6A"> A. $980.00</a></span></strong>
<div id="dialog_for_link1A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> The bond has to be selling for more than $1,000 since the coupon rate is far above the current market rate..</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link6B" href="#dialog_for_link6B"> B. $1,175.80</a></span></strong>
<div id="dialog_for_link6B" class="enhanceable_content dialog"><strong>Correct. </strong><br /> The Excel formula is =PV(2.5%,6,35,1140,0). This reflects</div>
<div class="enhanceable_content dialog">
<ul>
<li>2.5%: the semi-annual equivalent of the 5% current market rate.</li>
<li>6: The semi-annual periods for 3 years until the bond is called.</li>
<li>35: the semi-annual coupon payments or interest payments.</li>
<li>1140: The amount that investors will receive if the bond is called, a $140 call premium over the $1,000 face value.</li>
</ul>
</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link6C" href="#dialog_for_link6C"> C. $1,227.24</a></span></strong>
<div id="dialog_for_link6C" class="enhanceable_content dialog"><strong>Incorrect. </strong> This is the value of the bond ignoring its callability. The Excel formula is: =PV(2.5%,34,35,1000,0)</div>
<div class="enhanceable_content dialog">Notice that the face value is the $1,000 standard face value without the call premium.</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
7. A bond has a 6% coupon rate, matures in exactly 8 years, pays interest semi-annually and has a face value of $1,000. If current market conditions have bonds of similar risk and maturity priced to return 7%, what will this bond sell for? Hint: Is the 6% coupon a premium over current rates?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link7A" href="#dialog_for_link7A"> A. $939.53</a></span></strong>
<div id="dialog_for_link7A" class="enhanceable_content dialog"><strong>Correct. </strong><br /> The Excel formula is =PV(3.5%,16,30,1000,0)</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link7B" href="#dialog_for_link7B"> B. $1,000.00</a></span></strong>
<div id="dialog_for_link7B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer ddoesn't adjust for the market rate of 7%.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link7C" href="#dialog_for_link7C"> C. $1,065.28</a></span></strong>
<div id="dialog_for_link7C" class="enhanceable_content dialog"><strong>Incorrect. </strong> The Excel formula is: =PV(3.5%,16,30,1000,0)</div>
<div class="enhanceable_content dialog">The Rate inlut should be half of 7%.</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
8. A bond has a 6% coupon rate, matures in exactly 20 years, pays interest semi-annually and has a face value of $1,000. If I buy the bond for $1,000 today and it is called in 2 years with a $120 call premium, what is my rate of return? Hint: Use the Excel RATE function, but think about whether this is an annual or semi-annual rate. To check your answer the discounted futre cash flows should equal the purchase price of $1,000. If you have done the problem correctly, the Rate result is a semi-annual rate. To turn it into the exact annual rate we need to compute (1+Rate)<sup>2</sup> - 1 , so a semi-annual rate of 5% becomes an annual rate of (1.05)<sup>2</sup> - 1 = 0.1025 = 10.25% a little higher than the doubled rate.<br />
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link8A" href="#dialog_for_link8A"> A. 5.75%</a></span></strong>
<div id="dialog_for_link8A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This is the semi-annual rate.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link8B" href="#dialog_for_link8B"> B. 6%</a></span></strong>
<div id="dialog_for_link8B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This result requires the payment on the called bond to be $1,000 but there is a call premium so the rate should be higher than the coupon rate.</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link8C" href="#dialog_for_link8C"> C. 11.837%</a></span></strong>
<div id="dialog_for_link8C" class="enhanceable_content dialog"><strong>Correct. </strong> The Excel formula is: =RATE(4,30,-1000,1120,0,) =0.057 which is th semi-annual rate.</div>
<div class="enhanceable_content dialog">Turning this into the annual rate (1.0575)<sup>2</sup> - 1 (or =1.0575^2 - 1 in Excel) = 011837319 = 11.837%</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
9. A share of preferred stock pays a $2.50 annual dividend. If the stock is priced to return 10% what is its price today? <br />
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link9A" href="#dialog_for_link9A"> A. $15.00</a></span></strong>
<div id="dialog_for_link9A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> Preferred stock is a perpetuity so is valued as</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link9B" href="#dialog_for_link9B"> B. $25.00</a></span></strong>
<div id="dialog_for_link9B" class="enhanceable_content dialog"><strong>Correct. </strong><br /> Preferred stock is a perpetuity so is valued as .</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link9C" href="#dialog_for_link9C"> C. $30.00</a></span></strong>
<div id="dialog_for_link9C" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> Preferred stock is a perpetuity so is valued as</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
10. General Products has just paid a $1.50 annual dividend. Investor expect the dividend to grow 3% per year indefinitely. If investors require a 12% return from securities of this risk, what is General Products' stock price today?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link10A" href="#dialog_for_link10A"> A. $12.50</a></span></strong>
<div id="dialog_for_link10A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This result doesn't grow the dividend one period as is required by the Gordon Constant Dividend Growth model.</div>
<div class="enhanceable_content dialog"><img class="equation_image" title="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:" src="/equation_images/P_0%253D%255Cfrac%257BDiv%255C%253Ax%255C%253A%255Cleft%25281%2Bg%255Cright%2529%257D%257B%255Cleft%2528r%255C%253A-%255C%253Ag%255Cright%2529%257D%255C%253A%255C%253A%255C%253A" alt="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:" /></div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link10B" href="#dialog_for_link10B"> B. $12.875</a></span></strong>
<div id="dialog_for_link10B" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> This answer doesn't subtract the growth rate from the required rate of return in the denominator as required by the
<div id="dialog_for_link10A" class="enhanceable_content dialog">Gordon Constant Dividend Growth model.</div>
<div class="enhanceable_content dialog"><img class="equation_image" title="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:" src="/equation_images/P_0%253D%255Cfrac%257BDiv%255C%253Ax%255C%253A%255Cleft%25281%2Bg%255Cright%2529%257D%257B%255Cleft%2528r%255C%253A-%255C%253Ag%255Cright%2529%257D%255C%253A%255C%253A%255C%253A" alt="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:" /></div>
</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link10C" href="#dialog_for_link10C"> C. $17.17</a></span></strong>
<div id="dialog_for_link10C" class="enhanceable_content dialog"><strong>Correct. </strong>
<div id="dialog_for_link10A" class="enhanceable_content dialog">Using the Gordon Constant Dividend Growth model.</div>
<div class="enhanceable_content dialog"><img class="equation_image" title="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:=\frac{1.50x1.03}{0.12-0.03}=\frac{1.545}{0.09}=17.166667" src="/equation_images/P_0%253D%255Cfrac%257BDiv%255C%253Ax%255C%253A%255Cleft%25281%2Bg%255Cright%2529%257D%257B%255Cleft%2528r%255C%253A-%255C%253Ag%255Cright%2529%257D%255C%253A%255C%253A%255C%253A%253D%255Cfrac%257B1.50x1.03%257D%257B0.12-0.03%257D%253D%255Cfrac%257B1.545%257D%257B0.09%257D%253D17.166667" alt="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:=\frac{1.50x1.03}{0.12-0.03}=\frac{1.545}{0.09}=17.166667" /></div>
</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
11. ACME common stock sells for $28.60 per share. Its most recent annual dividend was $2.20. If investors demand a 12% required rate of return from the stock, what dividend growth rate are they assuming the company will have?
<blockquote>
<table>
<tbody>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link11A" href="#dialog_for_link11A"> A. 3%</a></span></strong>
<div id="dialog_for_link11A" class="enhanceable_content dialog"><strong>Incorrect. </strong><br /> At a growth rate of 3%the price would be (2.20x1.035)/(.12-.035) =$26.79</div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link11B" href="#dialog_for_link11B"> B. 4%<br /></a></span></strong>
<div id="dialog_for_link11B" class="enhanceable_content dialog"><strong>Correct. </strong><br /> In the dividend growth model <img class="equation_image" title="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:so\:g=\frac{Pr\:-\:D}{P\:+\:D}" src="/equation_images/P_0%253D%255Cfrac%257BDiv%255C%253Ax%255C%253A%255Cleft%25281%2Bg%255Cright%2529%257D%257B%255Cleft%2528r%255C%253A-%255C%253Ag%255Cright%2529%257D%255C%253A%255C%253A%255C%253Aso%255C%253Ag%253D%255Cfrac%257BPr%255C%253A-%255C%253AD%257D%257BP%255C%253A%2B%255C%253AD%257D" alt="P_0=\frac{Div\:x\:\left(1+g\right)}{\left(r\:-\:g\right)}\:\:\:so\:g=\frac{Pr\:-\:D}{P\:+\:D}" />.</div>
<div class="enhanceable_content dialog">Inserting numbers we have <img class="equation_image" title="\frac{28.60\:x\:0.12\:-\:2.2}{28.6\:+\:2.20}=\:0.04" src="/equation_images/%255Cfrac%257B28.60%255C%253Ax%255C%253A0.12%255C%253A-%255C%253A2.2%257D%257B28.6%255C%253A%2B%255C%253A2.20%257D%253D%255C%253A0.04" alt="\frac{28.60\:x\:0.12\:-\:2.2}{28.6\:+\:2.20}=\:0.04" /></div>
</td>
</tr>
<tr>
<td><strong><span style="text-decoration: underline;"><a id="link11C" href="#dialog_for_link11C"> C. $4.31%</a></span></strong>
<div id="dialog_for_link11C" class="enhanceable_content dialog"><strong>Incorrect. </strong> This answer occurs if you forget to increase the value of the dividend.</div>
</td>
</tr>
</tbody>
</table>
</blockquote>
<p> </p>
</blockquote>