# Fight Finance

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You operate a cattle farm that supplies hamburger meat to the big fast food chains. You buy a lot of grain to feed your cattle, and you sell the fully grown cattle on the livestock market.

You're afraid of adverse movements in grain and livestock prices. What options should you buy to hedge your exposures in the grain and cattle livestock markets?

Select the most correct response:

A very low-risk stock just paid its semi-annual dividend of $0.14, as it has for the last 5 years. You conservatively estimate that from now on the dividend will fall at a rate of 1% every 6 months. If the stock currently sells for$3 per share, what must be its required total return as an effective annual rate?

If risk free government bonds are trading at a yield of 4% pa, given as an effective annual rate, would you consider buying or selling the stock?

The stock's required total return is:

Which one of the following will decrease net income (NI) but increase cash flow from assets (CFFA) in this year for a tax-paying firm, all else remaining constant?

Remember:

$$NI = (Rev-COGS-FC-Depr-IntExp).(1-t_c )$$ $$CFFA=NI+Depr-CapEx - \Delta NWC+IntExp$$

A residential investment property has an expected nominal total return of 6% pa and nominal capital return of 3% pa.

Inflation is expected to be 2% pa. All rates are given as effective annual rates.

What are the property's expected real total, capital and income returns? The answer choices below are given in the same order.

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

According to option theory, it's rational for students to submit their assignments as or as possible?

A semi-annual coupon bond has a yield of 3% pa. Which of the following statements about the yield is NOT correct? All rates are given to four decimal places.

A trader sells one crude oil futures contract on the CME expiring in one year with a locked-in futures price of $38.94 per barrel. The crude oil spot price is$40.33. If the trader doesn’t close out her contract before expiry then in one year she will have the:

A continuously compounded monthly return of 1% $(r_\text{cc monthly})$ is equivalent to a continuously compounded annual return $(r_\text{cc annual})$ of:

Which of the following assets would have the shortest duration?