Fight Finance

(a) 17,435.74

(b) 1,438.92

(c) 1,414.49

(d) 1,200.00

(e) 666.67

(a) Unlevered CFFA should be discounted by Google's 10% WACC after tax.

(b) Unlevered CFFA should be discounted by Motorola's 20% WACC after tax.

(c) Levered CFFA should be discounted by Google's 10% WACC after tax.

(d) Levered CFFA should be discounted by Motorola's 20% WACC after tax.

(e) Unlevered CFFA by 15%, the average of Google and Motorola's WACC after tax.

(a) Sole traders.

(b) Partnerships.

(c) Corporations.

(d) All of the above.

(e) None of the above

(a) Annualised percentage rate compounding per month.

(b) Effective monthly rate compounding per year.

(c) Annualised percentage rate compounding per year.

(d) Effective annual rate compounding per year.

(e) Annualised percentage rate compounding semi-annually.

(a) Mr Blue's expected utility of wealth from gambling is 5 while refusing is 7.07. So the gamble makes him less happy.

(b) Mrs Green's expected utility of wealth from gambling is 7.07 while refusing is 5. So the gamble makes her more happy.

(c) Mr Blue's certainty equivalent of the risky gamble is $25. This is less than his current wealth of $50 which is why he would refuse.

(d) Miss Red's certainty equivalent of the risky gamble is $50. This is equal to her current wealth of $50 which is why she is indifferent to gambling or not.

(e) Mrs Green's certainty equivalent of the risky gamble is $70.71. This is more than her current wealth of $50 which is why she would accept.

(a) Arithmetic average gross discrete return is ##\text{AAGDR}_{0\rightarrow T} = \dfrac{\text{GDR}_{0 \rightarrow 1}+\text{GDR}_{1\rightarrow 2}+...+\text{GDR}_{T-1 \rightarrow T}}{T}##

(b) Geometric average gross discrete return is ##\text{GAGDR}_{0\rightarrow T} = \dfrac{\text{GDR}_{0 \rightarrow 1} . \text{GDR}_{1\rightarrow 2} ... \text{GDR}_{T-1 \rightarrow T}}{T}##

(c) The geometric average gross discrete return can be quickly found using the first ##(P_0)## and last ##(P_T)## prices. ##\text{GAGDR}_{0\rightarrow T} = \left( \dfrac{P_T}{P_0} \right)^{1/T}##

(d) The arithmetic average is always bigger than or equal to the geometric average, ##\text{AAGDR} \ge \text{GAGDR}##.

(e) The arithmetic and geometric averages of returns will be equal if the variance of the stock's returns is zero.

(a) The 3-month government bill yield is likely to be given as a simple interest rate.

(b) The 10-year government bond yield is likely to be given as an annualised percentage rate compounding every six months since Japanese government bonds pay semi-annual coupons.

(c) As 10-year government bond yields fell over the last few years, bond investors would have made capital gains assuming that the bonds are fixed-coupon.

(d) The Japanese yield curve is ‘inverse’ at the latest time in mid-2017.

(e) The Japanese central bank has been maintaining expansionary monetary policy over the last few years.

If the Australian dollar quote of 0.8 USD per AUD suddenly falls to 0.7 USD per AUD, has the Australian dollar or against the US dollar?

(a) Announcement date

(b) Last cum-dividend date

(c) Ex-dividend date

(d) Record date

(e) Payment date

(a) The call option price is expected to be $654.757851.

(b) The stock investment value used for hedging should be $5506.488143, partly funded by $4845.505265 in debt.

(c) The interest expense on the borrowing from the previous day will be $0.663813.

(d) The gain on the stock is zero and the gain on the short call option is $6.225027.

(e) The net gain is $5.561214.