# Fight Finance

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A person is thinking about borrowing $100 from the bank at 7% pa and investing it in shares with an expected return of 10% pa. One year later the person will sell the shares and pay back the loan in full. Both the loan and the shares are fairly priced. What is the Net Present Value (NPV) of this one year investment? Note that you are asked to find the present value ($V_0$), not the value in one year ($V_1$). The hardest and most important aspect of business project valuation is the estimation of the: The first payment of a constant perpetual annual cash flow is received at time 5. Let this cash flow be $C_5$ and the required return be $r$. So there will be equal annual cash flows at time 5, 6, 7 and so on forever, and all of the cash flows will be equal so $C_5 = C_6 = C_7 = ...$ When the perpetuity formula is used to value this stream of cash flows, it will give a value (V) at time: Some countries' interest rates are so low that they're zero. If interest rates are 0% pa and are expected to stay at that level for the foreseeable future, what is the most that you would be prepared to pay a bank now if it offered to pay you$10 at the end of every year for the next 5 years?

In other words, what is the present value of five $10 payments at time 1, 2, 3, 4 and 5 if interest rates are 0% pa? After doing extensive fundamental analysis of a company, you believe that their shares are overpriced and will soon fall significantly. The market believes that there will be no such fall. Which of the following strategies is NOT a good idea, assuming that your prediction is true? If a firm makes a profit and pays no dividends, which of the following accounts will increase? If future required returns rise, and future expected cash flows remain the same, then prices will , or remain the ? Which Australian institution is in charge of monetary policy? A bank bill was bought for$99,000 and sold for \$100,000 thirty (30) days later. There are 365 days in the year. Which of the following formulas gives the simple interest rate per annum over those 30 days?

Note: To help you identify which is the correct answer without doing any calculations yourself, the formulas used to calculate the numbers are given.

A 3-for-2 stock split is equivalent to a 1-for-2 bonus issue or a 200% stock dividend. or ?