Interest expense (IntExp) is an important part of a company's income statement (or 'profit and loss' or 'statement of financial performance').

How does an **accountant** calculate the annual interest expense of a fixed-coupon bond that has a liquid secondary market? Select the most correct answer:

Annual interest expense is equal to:

A 10 year bond has a face value of $100, a yield of 6% pa and a fixed coupon rate of 8% pa, paid semi-annually. What is its price?

**Question 319** foreign exchange rate, monetary policy, American and European terms

Investors expect the Reserve Bank of Australia (RBA) to keep the policy rate steady at their next meeting.

Then unexpectedly, the RBA announce that they will increase the policy rate by 25 basis points due to fears that the economy is growing too fast and that inflation will be above their target rate of 2 to 3 per cent.

What do you expect to happen to Australia's exchange rate in the short term? The Australian dollar is likely to:

A fairly priced stock has an expected return equal to the market's. Treasury bonds yield 5% pa and the market portfolio's expected return is 10% pa. What is the stock's beta?

**Question 447** payout policy, corporate financial decision theory

Payout policy is most closely related to which part of a business?

Below are some statements about loans and bonds. The first descriptive sentence is correct. But one of the second sentences about the loans' or bonds' prices is not correct. Which statement is **NOT** correct? Assume that interest rates are positive.

Note that coupons or interest payments are the periodic payments made throughout a bond or loan's life. The face or par value of a bond or loan is the amount paid at the end when the debt matures.

Which of the following statements about call options is **NOT** correct?

**Question 897** 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?

**Question 921** utility, return distribution, log-normal distribution, arithmetic and geometric averages, no explanation

Who was the first theorist to propose the idea of ‘expected utility’?

**Question 929** standard error, mean and median returns, mode return, return distribution, arithmetic and geometric averages, continuously compounding rate, no explanation

The arithmetic average continuously compounded or log gross discrete return (AALGDR) on the ASX200 accumulation index over the 24 years from 31 Dec 1992 to 31 Dec 2016 is **9.49**% pa.

The arithmetic standard deviation (SDLGDR) is **16.92** percentage points pa.

Assume that the data are **sample** statistics, not population statistics. Assume that the log gross discrete returns are normally distributed.

What is the standard error of your estimate of the sample ASX200 accumulation index arithmetic average log gross discrete return (AALGDR) over the 24 years from 1992 to 2016?