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Question 130  debt terminology

An 'interest rate' is the same thing as a 'yield'. or ?

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 209  CFFA

Find Piano Bar's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.

Piano Bar
Income Statement for
year ending 30th June 2013
Sales 310
COGS 185
Operating expense 20
Depreciation 15
Interest expense 10
Income before tax 80
Tax at 30% 24
Net income 56
Piano Bar
Balance Sheet
as at 30th June 2013 2012
  $m $m
Current assets 240 230
    Cost 420 400
    Accumul. depr. 50 35
    Carrying amount 370 365
Total assets 610 595
Current liabilities 180 190
Non-current liabilities 290 265
Owners' equity
Retained earnings 90 90
Contributed equity 50 50
Total L and OE 610 595


Note: all figures are given in millions of dollars ($m).

Question 234  debt terminology

An 'interest only' loan can also be called a:

Question 435  option, no explanation

Will the price of a call option on equity or if the standard deviation of returns (risk) of the underlying shares becomes higher?

Question 509  bond pricing

Calculate the price of a newly issued ten year bond with a face value of $100, a yield of 8% pa and a fixed coupon rate of 6% pa, paid annually. So there's only one coupon per year, paid in arrears every year.

Question 557  portfolio weights, portfolio return

An investor wants to make a portfolio of two stocks A and B with a target expected portfolio return of 6% pa.

  • Stock A has an expected return of 5% pa.
  • Stock B has an expected return of 10% pa.

What portfolio weights should the investor have in stocks A and B respectively?

Question 615  debt terminology

You buy a house funded using a home loan. Have you or debt?

Question 652  future, continuously compounding rate

An equity index is currently at 5,200 points. The 6 month futures price is 5,300 points and the total required return is 6% pa with continuous compounding. Each index point is worth $25.

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

Question 910  money market

Which of the following is NOT a money market security?