For a price of $95, Nicole will sell you a 10 year bond paying semi-annual coupons of 8% pa. The face value of the bond is $100. Other bonds with the same risk, maturity and coupon characteristics trade at a yield of 8% pa.

Calculate the effective annual rates of the following three APR's:

- A credit card offering an interest rate of 18% pa, compounding monthly.
- A bond offering a yield of 6% pa, compounding semi-annually.
- An annual dividend-paying stock offering a return of 10% pa compounding annually.

All answers are given in the same order:

##r_\text{credit card, eff yrly}##, ##r_\text{bond, eff yrly}##, ##r_\text{stock, eff yrly}##

**Question 363** income and capital returns, inflation, real and nominal returns and cash flows, real estate

A residential investment property has an expected **nominal** total return of **8**% pa and nominal capital return of **3**% pa.

Inflation is expected to be **2**% pa. All rates are given as effective annual rates.

What are the property's expected **real** total, capital and income returns? The answer choices below are given in the same order.

Which of the following statements is **NOT** equivalent to the **yield** on debt?

Assume that the debt being referred to is fairly priced, but do not assume that it's priced at par.

A company conducts a **4** for **3** stock split. What is the percentage change in the stock price and the number of shares outstanding? The answers are given in the same order.

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. Which of the below statements is **NOT** correct?

Which of the following is **NOT** a valid method for estimating the beta of a company's stock? Assume that markets are efficient, a long history of past data is available, the stock possesses idiosyncratic and market risk. The variances and standard deviations below denote total risks.

Radio-Rentals.com offers the Apple iphone 5S smart phone for rent at $**12.95** per week paid in **advance** on a **2** year contract. After renting the phone, you must return it to Radio-Rentals.

Kogan.com offers the Apple iphone 5S smart phone for sale at $**699**. You estimate that the phone will last for **3** years before it will break and be worthless.

Currently, the effective annual interest rate is **11.351**%, the effective monthly interest rate **0.9**% and the effective weekly interest rate is **0.207**%. Assume that there are exactly **52** weeks per year and **12** months per year.

Find the equivalent annual cost of renting the phone and also buying the phone. The answers below are listed in the same order.

**Question 810** CAPM, systematic and idiosyncratic risk, market efficiency

Examine the graphs below. Assume that asset A is a single stock. Which of the following statements is **NOT** correct? **Asset A**: