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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?

Question 66 CAPM, SML

Government bonds currently have a return of 5% pa. A stock has an expected return of 6% pa and the market return is 7% pa. What is the beta of the stock?

Question 124 option, hedging

You operate a cattle farm that supplies hamburger meat to the big fast food chains. You buy a lot of grain to feed your cattle, and you sell the fully grown cattle on the livestock market.

You're afraid of adverse movements in grain and livestock prices. What options should you buy to hedge your exposures in the grain and cattle livestock markets?

Select the most correct response:

Question 225 CFFA

A firm has forecast its Cash Flow From Assets (CFFA) for this year and management is worried that it is too low. Which one of the following actions will lead to a higher CFFA for this year (t=0 to 1)? Only consider cash flows this year. Do not consider cash flows after one year, or the change in the NPV of the firm. Consider each action in isolation.

(a) Buy less land, buildings and trucks than what was planned. Assume that this has no impact on revenue.

(b) Pay off more debt than was planned, to reduce the firm’s interest expense.

(c) Change the depreciation method used for tax purposes from diminishing value to straight line, so less depreciation occurs this year and more occurs in later years. Assume that the government’s tax department allow this.

(d) Buying more inventory than was planned, so there is an increase in net working capital. Assume that there is no increase in sales.

(e) Raising new equity through a rights issue. Assume that all of the money raised is spent on new capital assets such as land and trucks, but they will be fitted out and delivered in one year so no new cash will be earned from them.

Question 506 leverage, accounting ratio

A firm has a debt-to-equity ratio of 25%. What is its debt-to-assets ratio?

Question 614 debt terminology

Question 723 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate

Here is a table of stock prices and returns. Which of the statements below the table is NOT correct?

Price and Return Population Statistics
Time	Prices	LGDR	GDR	NDR
0	100
1	99	-0.010050	0.990000	-0.010000
2	180.40	0.600057	1.822222	0.822222
3	112.73	0.470181	0.624889	0.375111

Arithmetic average		0.0399	1.1457	0.1457
Arithmetic standard deviation		0.4384	0.5011	0.5011

(a) The geometric average of the gross discrete returns (GAGDR) equals 1.04075 which is 104.075%.

(b) ##\exp \left( \text{GAGDR} \right) = \text{AALGDR}##. The natural exponent of the GAGDR equals the arithmetic average of the logarithms of the gross discrete returns (AALGDR).

(c) ##\text{GAGDR}^T = \left( P_T/P_0 \right)##. The GAGDR raised to the power of the number of time period that it's measured over equals the ratio of the first and last prices.

(d) ##\text{GAGDR} = \exp \left( \text{AALGDR} \right)##. This is always true, regardless of the distribution of the prices or returns. The logarithm of the geometric average of the gross discrete returns (LGAGDR) is always equal to the arithmetic average of the logarithm of the gross discrete returns (AALGDR).

(e) ##\text{AAGDR} \approx \exp \left( \text{AALGDR} + \text{SDLGDR}^2/2 \right)##. This is only approximately true and depends on the distribution of the prices and returns. It's asymptotically true as the time period that the returns are measured over reaches infinity.

Question 784 boot strapping zero coupon yield, forward interest rate, term structure of interest rates

Information about three risk free Government bonds is given in the table below.

Federal Treasury Bond Data
Maturity	Yield to maturity	Coupon rate	Face value	Price
(years)	(pa, compounding annually)	(pa, paid annually)	($)	($)
1	0%	2%	100	102
2	1%	2%	100	101.9703951
3	2%	2%	100	100

Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is NOT correct?

Question 874 utility, return distribution, log-normal distribution, arithmetic and geometric averages

Who was the first theorist to endorse the maximisiation of the geometric average gross discrete return for investors (not gamblers) since it gave a "...portfolio that has a greater probability of being as valuable or more valuable than any other significantly different portfolio at the end of n years, n being large"?

Question 970 foreign exchange rate, no explanation

Examine the below graph.

Which of the below statements is NOT correct?