Fight Finance

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Question 205  depreciation tax shield, CFFA

There are a number of ways that assets can be depreciated. Generally the government's tax office stipulates a certain method.

But if it didn't, what would be the ideal way to depreciate an asset from the perspective of a businesses owner?



Question 311  foreign exchange rate

When someone says that they're "buying American dollars" (USD), what type of asset are they probably buying? They're probably buying:



Question 346  NPV, annuity due

Your poor friend asks to borrow some money from you. He would like $1,000 now (t=0) and every year for the next 5 years, so there will be 6 payments of $1,000 from t=0 to t=5 inclusive. In return he will pay you $10,000 in seven years from now (t=7).

What is the net present value (NPV) of lending to your friend?

Assume that your friend will definitely pay you back so the loan is risk-free, and that the yield on risk-free government debt is 10% pa, given as an effective annual rate.



Question 347  PE ratio, Multiples valuation

Which of the following investable assets are NOT suitable for valuation using PE multiples techniques?



Question 381  Merton model of corporate debt, option, real option

In the Merton model of corporate debt, buying a levered company's debt is equivalent to buying risk free government bonds and:



Question 393  real option, option

A timing option is best modeled as a or option?


Question 608  debt terminology

You deposit cash into your bank account. Have you or debt?


Question 760  time calculation, interest only loan, no explanation

Five years ago (##t=-5## years) you entered into an interest-only home loan with a principal of $500,000, an interest rate of 4.5% pa compounding monthly with a term of 25 years.

Then interest rates suddenly fall to 3% pa (##t=0##), but you continue to pay the same monthly home loan payments as you did before. Will your home loan be paid off by the end of its remaining term? If so, in how many years from now? Measure the time taken to pay off the home loan from the current time which is 5 years after the home loan was first entered into.

Assume that the lower interest rate was given to you immediately after the loan repayment at the end of year 5, which was the 60th payment since the loan was granted. Also assume that rates were and are expected to remain constant.



Question 836  VaR, no explanation

The 95% daily VaR corresponds to the result on the:



Question 919  duration, bond convexity

Which of the following statements about bond convexity is NOT correct?