A credit card offers an interest rate of 18% pa, compounding monthly.

Find the effective monthly rate, effective annual rate and the effective daily rate. Assume that there are 365 days in a year.

All answers are given in the same order:

### r_\text{eff monthly} , r_\text{eff yearly} , r_\text{eff daily} ###

A project's Profitability Index (PI) is less than 1. Select the most correct statement:

Select the most correct statement from the following.

'Chartists', also known as 'technical traders', believe that:

Bonds X and Y are issued by the same US company. Both bonds yield **6**% pa, and they have the same face value ($100), maturity, seniority, and payment frequency.

The only difference is that bond X pays coupons of **8**% pa and bond Y pays coupons of **12**% pa. Which of the following statements is true?

A method commonly seen in textbooks for calculating a levered firm's free cash flow (FFCF, or CFFA) is the following:

###\begin{aligned} FFCF &= (Rev - COGS - Depr - FC - IntExp)(1-t_c) + \\ &\space\space\space+ Depr - CapEx -\Delta NWC + IntExp(1-t_c) \\ \end{aligned}###

A firm has a debt-to-equity ratio of 60%. What is its debt-to-assets ratio?

**Question 575** inflation, real and nominal returns and cash flows

You expect a **nominal** payment of $100 in 5 years. The **real** discount rate is 10% pa and the inflation rate is 3% pa. Which of the following statements is **NOT** correct?

A firm has a debt-to-assets ratio of **20**%. What is its debt-to-**equity** ratio?

**Question 807** market efficiency, expected and historical returns, CAPM, beta, systematic risk, no explanation

You work in Asia and just woke up. It looked like a nice day but then you read the news and found out that last night the American share market fell by **10**% while you were asleep due to surprisingly poor macro-economic world news. You own a portfolio of liquid stocks listed in Asia with a beta of **1.6**. When the Asian equity markets open, what do you expect to happen to your share portfolio? Assume that the capital asset pricing model (CAPM) is correct and that the market portfolio contains all shares in the world, of which American shares are a big part. Your portfolio beta is measured against this world market portfolio.

When the Asian equity market opens for trade, you would expect your portfolio value to:

A **one** year European-style **put** option has a strike price of $**4**.

The option's underlying stock currently trades at $**5**, pays no dividends and its standard deviation of continuously compounded returns is **47**% pa.

The risk-free interest rate is **10**% pa continuously compounded.

Use the Black-Scholes-Merton formula to calculate the option price. The put option price now is: