Below are 4 option graphs. Note that the y-axis is payoff at maturity (T). What options do they depict? List them in the order that they are numbered.
A project's NPV is positive. Select the most correct statement:
Your main expense is fuel for your car which costs $100 per month. You just refueled, so you won't need any more fuel for another month (first payment at t=1 month).
You have $2,500 in a bank account which pays interest at a rate of 6% pa, payable monthly. Interest rates are not expected to change.
Assuming that you have no income, in how many months time will you not have enough money to fully refuel your car?
A new company's Firm Free Cash Flow (FFCF, same as CFFA) is forecast in the graph below.
To value the firm's assets, the terminal value needs to be calculated using the perpetuity with growth formula:
###V_{\text{terminal, }t-1} = \dfrac{FFCF_{\text{terminal, }t}}{r-g}###
Which point corresponds to the best time to calculate the terminal value?
The below three graphs show probability density functions (PDF) of three different random variables Red, Green and Blue. Let ##P_1## be the unknown price of a stock in one year. ##P_1## is a random variable. Let ##P_0 = 1##, so the share price now is $1. This one dollar is a constant, it is not a variable.
Which of the below statements is NOT correct? Financial practitioners commonly assume that the shape of the PDF represented in the colour:
Question 784 boot strapping zero coupon yield, forward interest rate, term structure of interest rates
Information about three risk free Government bonds is given in the table below.
| Federal Treasury Bond Data | ||||
| Maturity | Yield to maturity | Coupon rate | Face value | Price |
| (years) | (pa, compounding annually) | (pa, paid annually) | ($) | ($) |
| 1 | 0% | 2% | 100 | 102 |
| 2 | 1% | 2% | 100 | 101.9703951 |
| 3 | 2% | 2% | 100 | 100 |
Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is NOT correct?
You bought a 1.5 year (18 month) futures contract on oil. Oil storage costs are 4% pa continuously compounded and oil pays no dividends. The futures contract is entered into when the oil price is $40 per barrel and the risk-free rate of interest is 10% per annum with continuous compounding.
Which of the following statements is NOT correct?
Question 856 credit terms, no explanation
Your supplier’s credit terms are "1/10 net 30". Which of the following statements about these credit terms is NOT correct?
If you intend to buy an item from your supplier for a tag price of $100 and you:
Question 871 duration, Macaulay duration, modified duration, portfolio duration
Which of the following statements about Macaulay duration is NOT correct? The Macaulay duration:
Find the Macaulay duration of a 2 year 5% pa semi-annual fixed coupon bond which has a $100 face value and currently has a yield to maturity of 8% pa. The Macaulay duration is: