A share just paid its semi-annual dividend of $10. The dividend is expected to grow at 2% every 6 months forever. This 2% growth rate is an effective 6 month rate. Therefore the next dividend will be $10.20 in six months. The required return of the stock 10% pa, given as an effective annual rate.
What is the price of the share now?
In the dividend discount model:
###P_0 = \dfrac{C_1}{r-g}###
The return ##r## is supposed to be the:
Three years ago Frederika bought a house for $400,000.
Now it's worth $600,000, based on recent similar sales in the area.
Frederika's residential property has an expected total return of 7% pa.
She rents her house out for $2,500 per month, paid in advance. Every 12 months she plans to increase the rental payments.
The present value of 12 months of rental payments is $29,089.48.
The future value of 12 months of rental payments one year ahead is $31,125.74.
What is the expected annual capital yield of the property?
The CAPM can be used to find a business's expected opportunity cost of capital:
###r_i=r_f+β_i (r_m-r_f)###
What should be used as the risk free rate ##r_f##?
An investor bought a 10 year 2.5% pa fixed coupon government bond priced at par. The face value is $100. Coupons are paid semi-annually and the next one is in 6 months.
Six months later, just after the coupon at that time was paid, yields suddenly and unexpectedly fell to 2% pa. Note that all yields above are given as APR's compounding semi-annually.
What was the bond investors' historical total return over that first 6 month period, given as an effective semi-annual rate?
You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?
A company has a 95% daily Value at Risk (VaR) of $1 million. The units of this VaR are in:
Question 888 foreign exchange rate, speculation, no explanation
The current Australian exchange rate is 0.8 USD per AUD.
If you think that the AUD will depreciate against the USD, contrary to the rest of the market, how could you profit? Right now you should:
Question 925 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate, no explanation
The arithmetic average and standard deviation of returns on the ASX200 accumulation index over the 24 years from 31 Dec 1992 to 31 Dec 2016 were calculated as follows:
###\bar{r}_\text{yearly} = \dfrac{ \displaystyle\sum\limits_{t=1992}^{24}{\left( \ln \left( \dfrac{P_{t+1}}{P_t} \right) \right)} }{T} = \text{AALGDR} =0.0949=9.49\% \text{ pa}###
###\sigma_\text{yearly} = \dfrac{ \displaystyle\sum\limits_{t=1992}^{24}{\left( \left( \ln \left( \dfrac{P_{t+1}}{P_t} \right) - \bar{r}_\text{yearly} \right)^2 \right)} }{T} = \text{SDLGDR} = 0.1692=16.92\text{ pp pa}###
Assume that the log gross discrete returns are normally distributed and that the above estimates are true population statistics, not sample statistics, so there is no standard error in the sample mean or standard deviation estimates. Also assume that the standardised normal Z-statistic corresponding to a one-tail probability of 2.5% is exactly -1.96.
Which of the following statements is NOT correct? If you invested $1m today in the ASX200, then over the next 4 years: