A 90-day Bank Accepted Bill (BAB) has a face value of $1,000,000. The simple interest rate is 10% pa and there are 365 days in the year. What is its price now?
Investors expect the Reserve Bank of Australia (RBA) to decrease the overnight cash rate at their next meeting.
Then unexpectedly, the RBA announce that they will keep the policy rate unchanged.
What do you expect to happen to Australia's exchange rate in the short term? The Australian dollar is likely to:
Over the next year, the management of an unlevered company plans to:
- Achieve firm free cash flow (FFCF or CFFA) of $1m.
- Pay dividends of $1.8m
- Complete a $1.3m share buy-back.
- Spend $0.8m on new buildings without buying or selling any other fixed assets. This capital expenditure is included in the CFFA figure quoted above.
- All amounts are received and paid at the end of the year so you can ignore the time value of money.
- The firm has sufficient retained profits to pay the dividend and complete the buy back.
- The firm plans to run a very tight ship, with no excess cash above operating requirements currently or over the next year.
How much new equity financing will the company need? In other words, what is the value of new shares that will need to be issued?
A moped is a bicycle with pedals and a little motor that can be switched on to assist the rider. Mopeds offer the rider:
The CAPM can be used to find a business's expected opportunity cost of capital:
What should be used as the risk free rate ##r_f##?
Which of the following equations is NOT equal to the total return of an asset?
Let ##p_0## be the current price, ##p_1## the expected price in one year and ##c_1## the expected income in one year.
Which of the following interest rate labels does NOT make sense?
Which of the following quantities is commonly assumed to be normally distributed?
Which of the following statements is NOT correct? Assume that all things remain equal. So for example, don't assume that just because a company's dividends and profit rise that its required return will also rise, assume the required return stays the same.
The below table summarises the borrowing costs confronting two companies A and B.
|Bond Market Yields|
|Fixed Yield to Maturity (%pa)||Floating Yield (%pa)|
|Firm A||3||L - 0.4|
|Firm B||5||L + 1|
Firm A wishes to borrow at a floating rate and Firm B wishes to borrow at a fixed rate. Design a non-intermediated swap that benefits firm A only. What will be the swap rate?