For a price of $100, Rad 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 the same risk, maturity and coupon characteristics trade at a yield of 6% pa.
A two year Government bond has a face value of $100, a yield of 0.5% and a fixed coupon rate of 0.5%, paid semi-annually. What is its price?
Treasury bonds currently have a return of 5% pa. A stock has a beta of 0.5 and the market return is 10% pa. What is the expected return of the stock?
The following table shows a sample of historical total returns of shares in two different companies A and B.
| Stock Returns | ||
| Total effective annual returns | ||
| Year | ##r_A## | ##r_B## |
| 2007 | 0.2 | 0.4 |
| 2008 | 0.04 | -0.2 |
| 2009 | -0.1 | -0.3 |
| 2010 | 0.18 | 0.5 |
What is the historical sample covariance (##\hat{\sigma}_{A,B}##) and correlation (##\rho_{A,B}##) of stock A and B's total effective annual returns?
The following cash flows are expected:
- A perpetuity of yearly payments of $30, with the first payment in 5 years (first payment at t=5, which continues every year after that forever).
- One payment of $100 in 6 years and 3 months (t=6.25).
What is the NPV of the cash flows if the discount rate is 10% given as an effective annual rate?
A firm conducts a two-for-one stock split. Which of the following consequences would NOT be expected?
A graph of assets’ expected returns ##(\mu)## versus standard deviations ##(\sigma)## is given in the below diagram.
Each letter corresponds to a separate coloured area. The portfolios at the boundary of the areas, on the black lines, are excluded from each area. Assume that all assets represented in this graph are fairly priced, and that all risky assets can be short-sold.
Which of the following statements about this graph and Markowitz portfolio theory is NOT correct?
When does a European option's last-traded market price become a sunk cost?
Question 869 economic order quantity
A Queensland farmer grows strawberries in greenhouses and supplies Australian supermarkets all year round. The farmer must decide how often he should contract the truck driver to deliver his strawberries and how many boxes to send on each delivery. The farmer:
- Sells 100,000 boxes of strawberries per year;
- Incurs holding costs (refrigeration and spoilage) of $16 per box per year; and
- Must pay the truck driver delivery fees at $0.20 per box plus a $500 fixed fee per delivery.
Which of the following statements about the Economic Order Quantity is NOT correct?
Which type of business organisation has the most checks and balances against the detrimental effects of the principal-agent problem since it's potentially the most exposed?