Fight Finance

Courses  Tags  Random  All  Recent  Scores

Question 15  bond pricing

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.

Would you like to the bond or politely ?

Question 77  interest tax shield

The equations for Net Income (NI, also known as Earnings or Net Profit After Tax) and Cash Flow From Assets (CFFA, also known as Free Cash Flow to the Firm) per year are:


###CFFA=NI+Depr-CapEx - \varDelta NWC+IntExp###

For a firm with debt, what is the amount of the interest tax shield per year?

Question 83  portfolio risk, standard deviation

Portfolio Details
Stock Expected
Correlation ##(\rho_{A,B})## Dollars
A 0.1 0.4 0.5 60
B 0.2 0.6 140

What is the standard deviation (not variance) of returns of the above portfolio?

Question 174  profitability index

A project has the following cash flows:

Project Cash Flows
Time (yrs) Cash flow ($)
0 -400
1 200
2 250

What is the Profitability Index (PI) of the project? Assume that the cash flows shown in the table are paid all at once at the given point in time. The required return is 10% pa, given as an effective annual rate.

Question 320  foreign exchange rate, monetary policy, American and European terms

Investors expect the Reserve Bank of Australia (RBA) to decrease the overnight cash rate at their next meeting.

Then unexpectedly, the RBA announce that they will keep the policy rate unchanged.

What do you expect to happen to Australia's exchange rate in the short term? The Australian dollar is likely to:

Question 500  NPV, IRR

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

For what discount rate or range of discount rates would you accept and commence the project?

All answer choices are given as approximations from reading off the graph.

Question 612  debt terminology

You are owed money. Are you a or a ?

Question 618  capital structure, no explanation

Who owns a company's shares? The:

Question 697  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 884  monetary policy, impossible trinity, foreign exchange rate, no explanation

According to the impossible trinity, a currency can only have two of these three desirable traits: be fixed against the USD; convertible to and from USD for traders and investors so there are open goods, services and capital markets; and allow independent monetary policy set by the country’s central bank, independent of the US central bank.

Which of the following exchange rate regimes sacrifices fixing the exchange rate to the USD? In other words, which regime uses a floating exchange rate?