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Question 120 credit risk, payout policy

A newly floated farming company is financed with senior bonds, junior bonds, cumulative non-voting preferred stock and common stock. The new company has no retained profits and due to floods it was unable to record any revenues this year, leading to a loss. The firm is not bankrupt yet since it still has substantial contributed equity (same as paid-up capital).

On which securities must it pay interest or dividend payments in this terrible financial year?

Question 134 fully amortising loan, APR

You want to buy an apartment worth $400,000. You have saved a deposit of $80,000. The bank has agreed to lend you the $320,000 as a fully amortising mortgage loan with a term of 30 years. The interest rate is 6% pa and is not expected to change. What will be your monthly payments?

Question 278 inflation, real and nominal returns and cash flows

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.

Question 438 option, no explanation

Question 596 future, continuously compounding rate

An equity index is currently at 5,000 points. The 2 year futures price is 5,400 points and the total required return is 8% pa with continuous compounding. Each index point is worth $25.

What is the implied continuous dividend yield as a continuously compounded rate per annum?

Question 680 option, no explanation

A trader buys one crude oil European style put option contract on the CME expiring in one year with an exercise price of $44 per barrel for a price of $6.64. The crude oil spot price is $40.33. If the trader doesn’t close out her contract before maturity, then at maturity she will have the:

Question 744 income and capital returns, real and nominal returns and cash flows, inflation

If someone says "my shares rose by 10% last year", what do you assume that they mean? The effective annual:

Question 833 option, delta, theta, standard deviation, no explanation

Which of the following statements about an option (either a call or put) and its underlying stock is NOT correct?

(a) The option’s expected future continuously compounded returns are always more than or equal to the underlying stock’s expected future continuously compounded returns.

(b) The option’s standard deviation of dollar price changes is always less than or equal to the underlying stock’s standard deviation of dollar price changes.

(c) The option’s standard deviation of continuously compounded returns are always less than or equal to the underlying stock’s standard deviation of continuously compounded returns.

(d) As time elapses and the maturity date of an option approaches, its price will fall, all other things remaining equal.

(e) If the underlying stock’s price rises by $0.01, the call option’s price will rise by less than $0.01 and the put option’s price will fall by less than $0.01.

Question 915 price gains and returns over time, IRR, NPV, income and capital returns, effective return

For a share price to double over 7 years, what must its capital return be as an effective annual rate?

Question 946 stock split, bonus issue, stock dividend