Katya offers to pay you $10 at the end of every year for the next 5 years (t=1,2,3,4,5) if you pay her $50 now (t=0). You can borrow and lend from the bank at an interest rate of 10% pa, given as an effective annual rate. Ignore credit risk.
Question 353 income and capital returns, inflation, real and nominal returns and cash flows, real estate
A residential investment property has an expected nominal total return of 6% pa and nominal capital return of 3% pa.
Inflation is expected to be 2% pa. All rates are given as effective annual rates.
What are the property's expected real total, capital and income returns? The answer choices below are given in the same order.
One formula for calculating a levered firm's free cash flow (FFCF, or CFFA) is to use net operating profit after tax (NOPAT).
###\begin{aligned} FFCF &= NOPAT + Depr - CapEx -\Delta NWC \\ &= (Rev - COGS - Depr - FC)(1-t_c) + Depr - CapEx -\Delta NWC \\ \end{aligned} \\###
Question 739 real and nominal returns and cash flows, inflation
There are a number of different formulas involving real and nominal returns and cash flows. Which one of the following formulas is NOT correct? All returns are effective annual rates. Note that the symbol ##\approx## means 'approximately equal to'.
A share will pay its next dividend of ##C_1## in one year, and will continue to pay a dividend every year after that forever, growing at a rate of ##g##. So the next dividend will be ##C_2=C_1 (1+g)^1##, then ##C_3=C_2 (1+g)^1##, and so on forever.
The current price of the share is ##P_0## and its required return is ##r##
Which of the following is NOT equal to the expected share price in 2 years ##(P_2)## just after the dividend at that time ##(C_2)## has been paid?
Question 797 option, Black-Scholes-Merton option pricing, option delta, no explanation
Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the risk-neutral probability that a European put option will be exercised?
A put option written on a risky non-dividend paying stock will mature in one month. As is normal, assume that the option's exercise price is non-zero and positive ##(K>0)## and the stock has limited liability ##(S>0)##.
Which of the following statements is NOT correct? The put option's:
Question 858 indirect security, intermediated finance, no explanation
Which of the following transactions involves an ‘indirect security’ using a ‘financial intermediary’?
Question 872 duration, Macaulay duration, modified duration, portfolio duration
A fixed coupon bond’s modified duration is 20 years, and yields are currently 10% pa compounded annually. Which of the following statements about the bond is NOT correct?