A 90-day Bank Accepted Bill (BAB) has a face value of $1,000,000. The simple interest rate is 10% pa and there are 365 days in the year. What is its price now?
Acquirer firm plans to launch a takeover of Target firm. The firms operate in different industries and the CEO's rationale for the merger is to increase diversification and thereby decrease risk. The deal is not expected to create any synergies. An 80% scrip and 20% cash offer will be made that pays the fair price for the target's shares. The cash will be paid out of the firms' cash holdings, no new debt or equity will be raised.
Firms Involved in the Takeover | ||
Acquirer | Target | |
Assets ($m) | 6,000 | 700 |
Debt ($m) | 4,800 | 400 |
Share price ($) | 40 | 20 |
Number of shares (m) | 30 | 15 |
Ignore transaction costs and fees. Assume that the firms' debt and equity are fairly priced, and that each firms' debts' risk, yield and values remain constant. The acquisition is planned to occur immediately, so ignore the time value of money.
Calculate the merged firm's share price and total number of shares after the takeover has been completed.
Question 542 price gains and returns over time, IRR, NPV, income and capital returns, effective return
For an asset price to double every 10 years, what must be the expected future capital return, given as an effective annual rate?
Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?
Question 719 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate
A stock has an arithmetic average continuously compounded return (AALGDR) of 10% pa, a standard deviation of continuously compounded returns (SDLGDR) of 80% pa and current stock price of $1. Assume that stock prices are log-normally distributed. The graph below summarises this information and provides some helpful formulas.
In one year, what do you expect the median and mean prices to be? The answer options are given in the same order.
Which of the following statements about the Basel 3 minimum capital requirements is NOT correct? Common equity tier 1 (CET1) comprises the highest quality components of capital that fully satisfy all of the following characteristics:
Question 906 effective rate, return types, net discrete return, return distribution, price gains and returns over time
For an asset's price to double from say $1 to $2 in one year, what must its effective annual return be? Note that an effective annual return is also called a net discrete return per annum. If the price now is ##P_0## and the price in one year is ##P_1## then the effective annul return over the next year is:
###r_\text{effective annual} = \dfrac{P_1 - P_0}{P_0} = \text{NDR}_\text{annual}###Question 907 continuously compounding rate, return types, return distribution, price gains and returns over time
For an asset's price to double from say $1 to $2 in one year, what must its continuously compounded return ##(r_{CC})## be? If the price now is ##P_0## and the price in one year is ##P_1## then the continuously compounded return over the next year is:
###r_\text{CC annual} = \ln{\left[ \dfrac{P_1}{P_0} \right]} = \text{LGDR}_\text{annual}###Question 980 balance of payments, current account, no explanation
Observe the below graph of the US current account surplus as a proportion of GDP.
Define lending as buying (or saving or investing in) debt and equity assets.
The sum of US ‘net private saving’ plus ‘net general government lending’ equals the US: