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Question 156  APR, effective rate

A 2 year government bond yields 5% pa with a coupon rate of 6% pa, paid semi-annually.

Find the effective six month rate, effective annual rate and the effective daily rate. 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 yrly}##, ##r_\text{eff daily}##.



Question 171  DDM, income and capital returns

The following is the Dividend Discount Model used to price stocks:

### p_0=\frac{d_1}{r-g} ###

Which of the following statements about the Dividend Discount Model is NOT correct?



Question 234  debt terminology

An 'interest only' loan can also be called a:



Question 458  capital budgeting, no explanation

Which of the following is NOT a valid method to estimate future revenues or costs in a pro-forma income statement when trying to value a company?



Question 559  variance, standard deviation, covariance, correlation

Which of the following statements about standard statistical mathematics notation is NOT correct?



Question 588  option

If trader A has sold the right that allows counterparty B to buy the underlying asset from him at maturity if counterparty B wants then trader A is:



Question 610  debt terminology

You deposit cash into your bank account. Does the deposit account represent a debt or to you?


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:



Question 775  utility, utility function

Below is a graph of 3 peoples’ utility functions, Mr Blue (U=W^(1/2) ), Miss Red (U=W/10) and Mrs Green (U=W^2/1000). Assume that each of them currently have $50 of wealth.

Utility curves

Which of the following statements about them is NOT correct?

(a) Mr Blue would prefer to invest his wealth in a well diversified portfolio of stocks rather than a single stock, assuming that all stocks had the same total risk and return.



Question 824  option, no explanation

A put option written on a risky non-dividend paying stock will mature in one month. As is normal, assume that the option's exercise price is non-zero and positive ##(K>0)## and the stock has limited liability ##(S>0)##.

Which of the following statements is NOT correct? The put option's: