A three year bond has a face value of $100, a yield of 10% and a fixed coupon rate of 5%, paid semi-annually. What is its price?
A young lady is trying to decide if she should attend university or not.
The young lady's parents say that she must attend university because otherwise all of her hard work studying and attending school during her childhood was a waste.
What's the correct way to classify this item from a capital budgeting perspective when trying to decide whether to attend university?
The hard work studying at school in her childhood should be classified as:
Question 575 inflation, real and nominal returns and cash flows
You expect a nominal payment of $100 in 5 years. The real discount rate is 10% pa and the inflation rate is 3% pa. Which of the following statements is NOT correct?
An equity index stands at 100 points and the one year equity futures price is 102.
The equity index is expected to have a dividend yield of 4% pa. Assume that investors are risk-neutral so their total required return on the shares is the same as the risk free Treasury bond yield which is 10% pa. Both are given as discrete effective annual rates.
Assuming that the equity index is fairly priced, an arbitrageur would recognise that the equity futures are:
You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?
Question 834 option, delta, theta, gamma, standard deviation, Black-Scholes-Merton option pricing
Which of the following statements about an option (either a call or put) and its underlying stock is NOT correct?
| European Call Option | ||
| on a non-dividend paying stock | ||
| Description | Symbol | Quantity |
| Spot price ($) | ##S_0## | 20 |
| Strike price ($) | ##K_T## | 18 |
| Risk free cont. comp. rate (pa) | ##r## | 0.05 |
| Standard deviation of the stock's cont. comp. returns (pa) | ##\sigma## | 0.3 |
| Option maturity (years) | ##T## | 1 |
| Call option price ($) | ##c_0## | 3.939488 |
| Delta | ##\Delta = N[d_1]## | 0.747891 |
| ##N[d_2]## | ##N[d_2]## | 0.643514 |
| Gamma | ##\Gamma## | 0.053199 |
| Theta ($/year) | ##\Theta = \partial c / \partial T## | 1.566433 |
A British man wants to calculate how many British pounds (GBP) he needs to buy a 1 million euro (EUR) apartment in Germany. The exchange rate is 1.42 USD per GBP and 1.23 USD per EUR. What is the EUR 1 million equivalent to in GBP?
Question 896 comparative advantage in trade, production possibilities curve, no explanation
Adam and Bella are the only people on a remote island. Their production possibility curves are shown in the graph.
Which of the following statements is NOT correct?
You work for XYZ company and you’ve been asked to evaluate a new project which has double the systematic risk of the company’s other projects.
You use the Capital Asset Pricing Model (CAPM) formula and input the treasury yield ##(r_f )##, market risk premium ##(r_m-r_f )## and the company’s asset beta risk factor ##(\beta_{XYZ} )## into the CAPM formula which outputs a return.
This return that you’ve just found is: