Which of the following statements about short-selling is NOT true?
The average weekly earnings of an Australian adult worker before tax was $1,542.40 per week in November 2014 according to the Australian Bureau of Statistics. Therefore average annual earnings before tax were $80,204.80 assuming 52 weeks per year. Personal income tax rates published by the Australian Tax Office are reproduced for the 2014-2015 financial year in the table below:
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $37,000 | 19c for each $1 over $18,200 |
| $37,001 – $80,000 | $3,572 plus 32.5c for each $1 over $37,000 |
| $80,001 – $180,000 | $17,547 plus 37c for each $1 over $80,000 |
| $180,001 and over | $54,547 plus 45c for each $1 over $180,000 |
The above rates do not include the Medicare levy of 2%. Exclude the Medicare levy from your calculations
How much personal income tax would you have to pay per year if you earned $80,204.80 per annum before-tax?
The efficient markets hypothesis (EMH) and no-arbitrage pricing theory are most closely related to which of the following concepts?
A company advertises an investment costing $1,000 which they say is underpriced. They say that it has an expected total return of 15% pa, but a required return of only 10% pa. Of the 15% pa total expected return, the dividend yield is expected to always be 7% pa and rest is the capital yield.
Assuming that the company's statements are correct, what is the NPV of buying the investment if the 15% total return lasts for the next 100 years (t=0 to 100), then reverts to 10% after that time? Also, what is the NPV of the investment if the 15% return lasts forever?
In both cases, assume that the required return of 10% remains constant, the dividends can only be re-invested at 10% pa and all returns are given as effective annual rates.
The answer choices below are given in the same order (15% for 100 years, and 15% forever):
Which of the below formulas gives the profit ##(\pi)## from being short a call option? Let the underlying asset price at maturity be ##S_T##, the exercise price be ##X_T## and the option price be ##f_{LC,0}##. Note that ##S_T##, ##X_T## and ##f_{LC,0}## are all positive numbers.
Question 742 price gains and returns over time, no explanation
For an asset's price to quintuple (be five times as big, say from $1 to $5) every 5 years, what must be its effective annual capital return?
How much more can you borrow using an interest-only loan compared to a 25-year fully amortising loan if interest rates are 4% pa compounding per month and are not expected to change? If it makes it easier, assume that you can afford to pay $2,000 per month on either loan. Express your answer as a proportional increase using the following formula:
###\text{Proportional Increase} = \dfrac{V_\text{0,interest only}}{V_\text{0,fully amortising}} - 1###The risk-weight on "Margin lending against listed instruments on recognised exchanges" is 20% according to APRA's interpretation of the Basel 3 Accord in 'Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk, Attachment A: Risk-weights for on-balance sheet assets'.
A bank is considering lending a $100,000 margin loan secured by an ASX-listed stock. How much regulatory capital will the bank require to grant this loan under the Basel 3 Accord? Ignore the capital conservation buffer and the off-balance sheet exposure.
Below is a table of the 'Risk-weights for residential mortgages' as shown in APRA Basel 3 Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk January 2013.
| LVR (%) |
Standard eligible mortgages |
Non-standard eligible mortgages |
||
|
|
Risk-weight (no mortgage insurance) % |
Risk-weight (with at least 40% of the mortgage insured by an acceptable LMI) % |
Risk-weight (no mortgage insurance) % |
Risk-weight (with at least 40% of the mortgage insured by an acceptable LMI) % |
| 0 – 60 |
35 |
35 |
50 |
35 |
| 60.01 – 80 |
35 |
35 |
75 |
50 |
| 80.01 – 90 |
50 |
35 |
100 |
75 |
| 90.01 – 100 |
75 |
50 |
100 |
75 |
| > 100.01 |
100 |
75 |
100 |
100 |
A bank is considering granting a home loan to a man to buy a house worth $1.25 million using his own funds and the loan. The loan would be standard with no lenders mortgage insurance (LMI) and an LVR of 80%.
What is the minimum regulatory capital that the bank requires to grant the home loan under the Basel 3 Accord? Ignore the capital conservation buffer.