All things remaining equal, the variance of a portfolio of two positively-weighted stocks rises as:
Find World Bar's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.
| World Bar | ||
| Income Statement for | ||
| year ending 30th June 2013 | ||
| $m | ||
| Sales | 300 | |
| COGS | 150 | |
| Operating expense | 50 | |
| Depreciation | 40 | |
| Interest expense | 10 | |
| Taxable income | 50 | |
| Tax at 30% | 15 | |
| Net income | 35 | |
| World Bar | ||
| Balance Sheet | ||
| as at 30th June | 2013 | 2012 |
| $m | $m | |
| Assets | ||
| Current assets | 200 | 230 |
| PPE | ||
| Cost | 400 | 400 |
| Accumul. depr. | 75 | 35 |
| Carrying amount | 325 | 365 |
| Total assets | 525 | 595 |
| Liabilities | ||
| Current liabilities | 150 | 205 |
| Non-current liabilities | 235 | 250 |
| Owners' equity | ||
| Retained earnings | 100 | 100 |
| Contributed equity | 40 | 40 |
| Total L and OE | 525 | 595 |
Note: all figures above and below are given in millions of dollars ($m).
Which one of the below statements about effective rates and annualised percentage rates (APR's) is NOT correct?
An investor bought a 20 year 5% pa fixed coupon government bond priced at par. The face value is $100. Coupons are paid semi-annually and the next one is in 6 months.
Six months later, just after the coupon at that time was paid, yields suddenly and unexpectedly rose to 5.5% pa. Note that all yields above are given as APR's compounding semi-annually.
What was the bond investors' historical total return over that first 6 month period, given as an effective semi-annual rate?
Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?
Question 711 continuously compounding rate, continuously compounding rate conversion
A continuously compounded semi-annual return of 5% ##(r_\text{cc 6mth})## is equivalent to a continuously compounded annual return ##(r_\text{cc annual})## of:
A firm wishes to raise $30 million now. The firm's current market value of equity is $60m and the market price per share is $20. They estimate that they'll be able to issue shares in a rights issue at a subscription price of $15. Ignore the time value of money and assume that all shareholders exercise their rights. Which of the following statements 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 861 open interest, closing out future contract, no explanation
Alice, Bob, Chris and Delta are traders in the futures market. The following trades occur over a single day in a newly-opened equity index future that matures in one year which the exchange just made available.
1. Alice buys 2 future from Bob.
2. Chris buys 5 futures from Delta.
3. Chris buys 9 futures from Bob.
These were the only trades made in this equity index future.
Which of the following statements is NOT correct?
A non-dividend paying stock has a current price of $20.
The risk free rate is 5% pa given as a continuously compounded rate.
Options on the stock are currently priced at $5 for calls and $5.55 for puts where both options have a 2 year maturity and an exercise price of $24.
You suspect that the call option contract is mis-priced and would like to conduct a risk-free arbitrage that requires zero capital. Which of the following steps about arbitraging the situation is NOT correct?