Fight Finance

Courses  Tags  Random  All  Recent  Scores

Question 138  bond pricing, premium par and discount bonds

Bonds A and B are issued by the same Australian company. Both bonds yield 7% pa, and they have the same face value ($100), maturity, seniority, and payment frequency.

The only difference is that bond A pays coupons of 10% pa and bond B pays coupons of 5% pa. Which of the following statements is true about the bonds' prices?



Question 171  DDM, income and capital returns

The following is the Dividend Discount Model used to price stocks:

### p_0=\frac{d_1}{r-g} ###

Which of the following statements about the Dividend Discount Model is NOT correct?



Question 275  derivative terminology, future

The 'futures price' in a futures contract is paid at the start when the futures contract is agreed to. or ?


Question 352  income and capital returns, DDM, real estate

Two years ago Fred bought a house for $300,000.

Now it's worth $500,000, based on recent similar sales in the area.

Fred's residential property has an expected total return of 8% pa.

He rents his house out for $2,000 per month, paid in advance. Every 12 months he plans to increase the rental payments.

The present value of 12 months of rental payments is $23,173.86.

The future value of 12 months of rental payments one year ahead is $25,027.77.

What is the expected annual growth rate of the rental payments? In other words, by what percentage increase will Fred have to raise the monthly rent by each year to sustain the expected annual total return of 8%?



Question 400  option, no explanation

A European put option will mature in ##T## years with a strike price of ##K## dollars. The underlying asset has a price of ##S## dollars.

What is an expression for the payoff at maturity ##(f_T)## in dollars from owning (being long) the put option?



Question 501  NPV, IRR, pay back period

The below graph shows a project's net present value (NPV) against its annual discount rate.

Which of the following statements is NOT correct?



Question 698  utility, risk aversion, utility function

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?

Utility curves



Question 761  NPV, annuity due, no explanation

The phone company Optus have 2 mobile service plans on offer which both have the same amount of phone call, text message and internet data credit. Both plans have a contract length of 24 months and the monthly cost is payable in advance. The only difference between the two plans is that one is a:

  • 'Bring Your Own' (BYO) mobile service plan, costing $80 per month. There is no phone included in this plan. The other plan is a:
  • 'Bundled' mobile service plan that comes with the latest smart phone, costing $100 per month. This plan includes the latest smart phone.

Neither plan has any additional payments at the start or end. Assume that the discount rate is 1% per month given as an effective monthly rate.

The only difference between the plans is the phone, so what is the implied cost of the phone as a present value? Given that the latest smart phone actually costs $600 to purchase outright from another retailer, should you commit to the BYO plan or the bundled plan?



Question 806  stock split, no explanation

A firm conducts a two-for-one stock split. Which of the following consequences would NOT be expected?



Question 836  VaR, no explanation

The 95% daily VaR corresponds to the result on the: