Visitor $0.00 Login or Register

Fight Finance

Courses Tags Random All Recent Scores

Question 155 inflation, real and nominal returns and cash flows, Loan, effective rate conversion

You are a banker about to grant a 2 year loan to a customer. The loan's principal and interest will be repaid in a single payment at maturity, sometimes called a zero-coupon loan, discount loan or bullet loan.

You require a real return of 6% pa over the two years, given as an effective annual rate. Inflation is expected to be 2% this year and 4% next year, both given as effective annual rates.

You judge that the customer can afford to pay back $1,000,000 in 2 years, given as a nominal cash flow. How much should you lend to her right now?

Question 267 term structure of interest rates

A European company just issued two bonds, a

3 year zero coupon bond at a yield of 6% pa, and a
4 year zero coupon bond at a yield of 6.5% pa.

What is the company's forward rate over the fourth year (from t=3 to t=4)? Give your answer as an effective annual rate, which is how the above bond yields are quoted.

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 453 DDM, income and capital returns

The perpetuity with growth equation is:

###P_0=\dfrac{C_1}{r-g}###

Which of the following is NOT equal to the expected capital return as an effective annual rate?

Question 499 NPV, Annuity

Some countries' interest rates are so low that they're zero.

If interest rates are 0% pa and are expected to stay at that level for the foreseeable future, what is the most that you would be prepared to pay a bank now if it offered to pay you $10 at the end of every year for the next 5 years?

In other words, what is the present value of five $10 payments at time 1, 2, 3, 4 and 5 if interest rates are 0% pa?

Question 655 capital budgeting, opportunity cost, sunk cost

The 'time value of money' is most closely related to which of the following concepts?

Question 687 option, no explanation

Which of the following statements about call options is NOT correct?

Question 743 price gains and returns over time, no explanation

How many years will it take for an asset's price to triple (increase from say $1 to $3) if it grows by 5% pa?

Question 878 foreign exchange rate, American and European terms

Question 951 option, in the money option