A three year corporate bond yields 12% pa with a coupon rate of 10% pa, paid semi-annually.
Find the effective six month yield, effective annual yield and the effective daily yield. Assume that each month has 30 days and that there are 360 days in a year.
All answers are given in the same order:
##r_\text{eff semi-annual}##, ##r_\text{eff yearly}##, ##r_\text{eff daily}##.
Diversification in a portfolio of two assets works best when the correlation between their returns is:
In the 1997 Asian financial crisis many countries' exchange rates depreciated rapidly against the US dollar (USD). The Thai, Indonesian, Malaysian, Korean and Filipino currencies were severely affected. The below graph shows these Asian countries' currencies in USD per one unit of their currency, indexed to 100 in June 1997.
Of the statements below, which is NOT correct? The Asian countries':
Bonds X and Y are issued by the same US company. Both bonds yield 6% pa, and they have the same face value ($100), maturity, seniority, and payment frequency.
The only difference is that bond X pays coupons of 8% pa and bond Y pays coupons of 12% pa. Which of the following statements is true?
Which of the following statements about option contracts is NOT correct? For every:
Question 624 franking credit, personal tax on dividends, imputation tax system, no explanation
Which of the following statements about Australian franking credits is NOT correct? Franking credits:
Assets A, B, M and ##r_f## are shown on the graphs above. Asset M is the market portfolio and ##r_f## is the risk free yield on government bonds. Assume that investors can borrow and lend at the risk free rate. Which of the below statements is NOT correct?
Question 987 interest tax shield, capital structure, debt terminology
What creates interest tax shields for a company?
Question 992 inflation, real and nominal returns and cash flows
You currently have $100 in the bank which pays a 10% pa interest rate.
Oranges currently cost $1 each at the shop and inflation is 5% pa which is the expected growth rate in the orange price.
This information is summarised in the table below, with some parts missing that correspond to the answer options. All rates are given as effective annual rates. Note that when payments are not specified as real, as in this question, they're conventionally assumed to be nominal.
| Wealth in Dollars and Oranges | ||||
| Time (year) | Bank account wealth ($) | Orange price ($) | Wealth in oranges | |
| 0 | 100 | 1 | 100 | |
| 1 | 110 | 1.05 | (a) | |
| 2 | (b) | (c) | (d) | |
Which of the following statements is NOT correct? Your: