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Question 12  bond pricing

For a price of $100, Carol will sell you a 5 year bond paying semi-annual coupons of 16% pa. The face value of the bond is $100. Other bonds with similar risk, maturity and coupon characteristics trade at a yield of 12% pa.

Would you like to her bond or politely ?


Question 194  bond pricing, capital raising

A firm wishes to raise $8 million now. They will issue 7% pa semi-annual coupon bonds that will mature in 10 years and have a face value of $100 each. Bond yields are 10% pa, given as an APR compounding every 6 months, and the yield curve is flat.

How many bonds should the firm issue?



Question 381  Merton model of corporate debt, option, real option

In the Merton model of corporate debt, buying a levered company's debt is equivalent to buying risk free government bonds and:



Question 428  takeover

In a takeover deal where the offer is 100% scrip (shares), the merged firm's number of shares will be equal to the acquirer firm's original number of shares. or ?


Question 537  PE ratio, Multiples valuation, no explanation

Estimate the French bank Societe Generale's share price using a backward-looking price earnings (PE) multiples approach with the following assumptions and figures only. Note that EUR is the euro, the European monetary union's currency.

  • The 4 major European banks Credit Agricole (ACA), Deutsche Bank AG (DBK), UniCredit (UCG) and Banco Santander (SAN) are comparable companies to Societe Generale (GLE);
  • Societe Generale's (GLE's) historical earnings per share (EPS) is EUR 2.92;
  • ACA's backward-looking PE ratio is 16.29 and historical EPS is EUR 0.84;
  • DBK's backward-looking PE ratio is 25.01 and historical EPS is EUR 1.26;
  • SAN's backward-looking PE ratio is 14.71 and historical EPS is EUR 0.47;
  • UCG's backward-looking PE ratio is 15.78 and historical EPS is EUR 0.40;

Note: Figures sourced from Google Finance on 27 March 2015.



Question 567  stock split, capital structure

A company conducts a 4 for 3 stock split. What is the percentage change in the stock price and the number of shares outstanding? The answers are given in the same order.



Question 570  foreign exchange rate

An American wishes to convert USD 1 million to Australian dollars (AUD). The exchange rate is 0.8 USD per AUD. How much is the USD 1 million worth in AUD?



Question 586  option

Which one of the following statements about option contracts is NOT correct?



Question 625  dividend re-investment plan, capital raising

Which of the following statements about dividend re-investment plans (DRP's) is NOT correct?



Question 691  continuously compounding rate, effective rate, continuously compounding rate conversion, no explanation

A bank quotes an interest rate of 6% pa with quarterly compounding. Note that another way of stating this rate is that it is an annual percentage rate (APR) compounding discretely every 3 months.

Which of the following statements about this rate is NOT correct? All percentages are given to 6 decimal places. The equivalent: