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.

In Australia, domestic university students are allowed to buy concession tickets for the bus, train and ferry which sell at a discount of **50**% to full-price tickets.

The Australian Government do not allow international university students to buy concession tickets, they have to pay the full price.

Some international students see this as unfair and they are willing to pay for fake university identification cards which have the concession sticker.

What is the most that an international student would be willing to pay for a fake identification card?

Assume that international students:

- consider buying their fake card on the morning of the first day of university from their neighbour, just before they leave to take the train into university.
- buy their weekly train tickets on the morning of the first day of each week.
- ride the train to university and back home again every day seven days per week until summer holidays
**40**weeks from now. The concession card only lasts for those 40 weeks. Assume that there are**52**weeks in the year for the purpose of interest rate conversion. - a single full-priced one-way train ride costs $
**5**. - have a discount rate of
**11**% pa, given as an effective annual rate.

Approach this question from a purely financial view point, ignoring the illegality, embarrassment and the morality of committing fraud.

**Question 638** option, option payoff at maturity, no explanation

Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being **long** a **put** option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.

**Question 639** option, option payoff at maturity, no explanation

Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being **short** a **put** option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.

How much more can you borrow using an **interest-only** loan compared to a **25**-year **fully amortising** loan if interest rates are **6**% pa compounding per month and are not expected to change? If it makes it easier, assume that you can afford to pay $2,000 per month on either loan. Express your answer as a proportional increase using the following formula:

A stock, a call, a put and a bond are available to trade. The call and put options' underlying asset is the stock they and have the same strike prices, ##K_T##.

You are currently **long** the **stock**. You want to **hedge** your long stock position without actually trading the stock. How would you do this?

You just spent $**1,000** on your credit card. The interest rate is **24**% pa compounding **monthly**. Assume that your credit card account has no fees and no minimum monthly repayment.

If you can't make any interest or principal payments on your credit card debt over the next year, how much will you owe **one year** from now?

**Question 860** idiom, hedging, speculation, arbitrage, market making, insider trading, no explanation

Which class of derivatives market trader is **NOT** principally focused on ‘buying low and selling high’?