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Question 10  DDM

For a price of $95, Sherylanne will sell you a share which is expected to pay its first dividend of $10 in 7 years (t=7), and will continue to pay the same $10 dividend every year after that forever.

The required return of the stock is 10% pa.

Would you like to the share or politely ?


Question 236  diversification, correlation, risk

Diversification in a portfolio of two assets works best when the correlation between their returns is:



Question 363  income and capital returns, inflation, real and nominal returns and cash flows, real estate

A residential investment property has an expected nominal total return of 8% pa and nominal capital return of 3% pa.

Inflation is expected to be 2% pa. All rates are given as effective annual rates.

What are the property's expected real total, capital and income returns? The answer choices below are given in the same order.



Question 484  payout ratio, dividend, no explanation

The below screenshot of Microsoft's (MSFT) details were taken from the Google Finance website on 28 Nov 2014. Some information has been deliberately blanked out.

Image of MSFT on Google finance on 28 Nov 2014

What was MSFT's approximate payout ratio over the last year?

Note that MSFT's past four quarterly dividends were $0.31, $0.28, $0.28 and $0.28.



Question 577  inflation, real and nominal returns and cash flows

What is the present value of a real payment of $500 in 2 years? The nominal discount rate is 7% pa and the inflation rate is 4% pa.



Question 636  option, option payoff at maturity, no explanation

Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being long a call option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.



Question 734  real and nominal returns and cash flows, inflation, DDM, no explanation

An equities analyst is using the dividend discount model to price a company's shares. The company operates domestically and has no plans to expand overseas. It is part of a mature industry with stable positive growth prospects.

The analyst has estimated the real required return (r) of the stock and the value of the dividend that the stock just paid a moment before ##(C_\text{0 before})##.

What is the highest perpetual real growth rate of dividends (g) that can be justified? Select the most correct statement from the following choices. The highest perpetual real expected growth rate of dividends that can be justified is the country's expected:



Question 767  idiom, corporate financial decision theory, no explanation

The sayings "Don't cry over spilt milk", "Don't regret the things that you can't change" and "What's done is done" are most closely related to which financial concept?



Question 874  utility, return distribution, log-normal distribution, arithmetic and geometric averages

Who was the first theorist to endorse the maximisiation of the geometric average gross discrete return for investors (not gamblers) since it gave a "...portfolio that has a greater probability of being as valuable or more valuable than any other significantly different portfolio at the end of n years, n being large"?

(a) Daniel Bernoulli.



Question 919  duration, bond convexity

Which of the following statements about bond convexity is NOT correct?