Fight Finance

(a) A positive NPV.

(b) A zero NPV.

(c) A negative NPV.

(d) A large amount of diversifiable risk.

(e) Zero diversifiable risk.

(a) 420.00

(b) 463.05

(c) 463.53

(d) 486.20

(e) 510.51

(a) ##\sigma_\text{yearly} = \sigma_\text{monthly}##

(b) ##\sigma_\text{yearly} = \sigma_\text{monthly} \times 12##

(c) ##\sigma_\text{yearly} = \sigma_\text{monthly} \times 144##

(d) ##\sigma_\text{yearly} = \sigma_\text{monthly} \times \sqrt{12}##

(e) ##\sigma_\text{yearly} = \sigma_\text{monthly} \times {12}^{1/3}##

(a) Alice has $6,000 cash, owes $10,000 credit card debt due immediately and 100% owns a sole tradership business with assets worth $10,000 and liabilities of $3,000.

(b) Billy has $10,000 cash, owes $6,000 credit card debt due immediately and 100% owns a corporate business with assets worth $3,000 and liabilities of $10,000.

(c) Carla has $6,000 cash, owes $10,000 credit card debt due immediately and 100% owns a corporate business with assets worth $10,000 and liabilities of $3,000.

(d) Darren has $10,000 cash, owes $6,000 credit card debt due immediately and 100% owns a sole tradership business with assets worth $3,000 and liabilities of $10,000.

(e) Ernie has $1,000 cash, lent $3,000 to his friend, and doesn't have any personal debt or own any businesses.

(a) 11 years

(b) 9 years

(c) 7 years

(d) 5 years

(e) 3 years

(a) 5.7145% pa

(b) 4.0952% pa

(c) 3.8096% pa

(d) 2.1904% pa

(e) 1.9048% pa

(a) -12.5% pa

(b) -4% pa

(c) -1.5% pa

(d) -1% pa

(e) 12.5% pa

(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) The geometric average of the gross discrete returns (GAGDR) equals 1 which is 100%.

(b) ##\text{GAGDR} = \exp \left( \text{AALGDR} \right)##. The GAGDR is equal to the natural exponent of the arithmetic average of the logarithms of the gross discrete returns (AALGDR).

(c) ##\text{GAGDR} = \left( P_T/P_0 \right)^{1/T}##. The GAGDR equals the ratio of the last and first prices raised to the power of the inverse of the number of time periods between them.

(d) ##\text{LGAGDR} = \text{AALGDR}##. This is always true, regardless of the distribution of the prices or returns and the number of return observations. The logarithm of the geometric average of the gross discrete returns (LGAGDR) is always equal to the arithmetic average of the logarithms of the gross discrete returns (AALGDR).

(e) ##\text{LAAGDR} = \text{AALGDR} + \text{SDLGDR}^2/2##. This is always true, regardless of the distribution of the prices or returns and the number of return observations. The logarithm of the arithmetic average of the gross discrete returns (LAAGDR) equals the arithmetic average of the logarithms of the gross discrete returns (AALGDR) plus half the variance of the LGDR's.

(a) ##P_0=\dfrac{C_\text{1,nominal}}{r_\text{nominal} - g_\text{nominal}}##

(b) ##P_0 =\dfrac{C_0 (1+g_\text{nominal} )^1}{r_\text{nominal} - g_\text{nominal}}##

(c) ##P_0=\dfrac{C_\text{1,real}}{r_\text{real} - g_\text{real}}##

(d) ##P_0=\dfrac{C_0 (1+r_\text{real})^1}{r_\text{real} - g_\text{real}}##

(e) ##P_0=\dfrac{C_0(1+r_\text{nominal} )^1}{r_\text{nominal} - g_\text{nominal}} - C_0##