# Fight Finance

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The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.

$$p_{0} = \frac{c_1}{r_{\text{eff}} - g_{\text{eff}}}$$

What is the discount rate '$r_\text{eff}$' in this equation?

A two year Government bond has a face value of $100, a yield of 0.5% and a fixed coupon rate of 0.5%, paid semi-annually. What is its price? The following is the Dividend Discount Model (DDM) used to price stocks: $$P_0=\dfrac{C_1}{r-g}$$ If the assumptions of the DDM hold, which one of the following statements is NOT correct? The long term expected: Unrestricted negative gearing is allowed in Australia, New Zealand and Japan. Negative gearing laws allow income losses on investment properties to be deducted from a tax-payer's pre-tax personal income. Negatively geared investors benefit from this tax advantage. They also hope to benefit from capital gains which exceed the income losses. For example, a property investor buys an apartment funded by an interest only mortgage loan. Interest expense is$2,000 per month. The rental payments received from the tenant living on the property are $1,500 per month. The investor can deduct this income loss of$500 per month from his pre-tax personal income. If his personal marginal tax rate is 46.5%, this saves $232.5 per month in personal income tax. The advantage of negative gearing is an example of the benefits of: Which of the following statements about standard statistical mathematics notation is NOT correct? A company's share price fell by 20% and its number of shares rose by 25%. Assume that there are no taxes, no signalling effects and no transaction costs. Which one of the following corporate events may have happened? A trader buys one December futures contract on orange juice. Each contract is for the delivery of 10,000 pounds. The current futures price is$1.20 per pound. The initial margin is $5,000 per contract, and the maintenance margin is$4,000 per contract.

What is the smallest price change would that would lead to a margin call for the buyer?

Mr Blue, Miss Red and Mrs Green are people with different utility functions.

Each person has $50 of initial wealth. A coin toss game is offered to each person at a casino where the player can win or lose$50. Each player can flip a coin and if they flip heads, they receive $50. If they flip tails then they will lose$50. Which of the following statements is NOT correct?

Question 841  gross domestic product, government spending, no explanation

The government spends money on:

• Goods and services such as defence, police, schools, hospitals and roads; and
• Transfer payments (also called welfare) such as the pension, dole, disability support and student support.

When calculating GDP, the ‘government spending’ component is supposed to include:

Which one of the following businesses is likely to be a public company in Australia, judging by its name?