A stock is expected to pay a dividend of $15 in one year (t=1), then $25 for 9 years after that (payments at t=2 ,3,...10), and on the 11th year (t=11) the dividend will be 2% less than at t=10, and will continue to shrink at the same rate every year after that forever. The required return of the stock is 10%. All rates are effective annual rates.
What is the price of the stock now?
Question 335 foreign exchange rate, American and European terms
Investors expect Australia's central bank, the RBA, to reduce the policy rate at their next meeting due to fears that the economy is slowing. Then unexpectedly, the policy rate is actually kept unchanged.
What do you expect to happen to Australia's exchange rate?
A man has taken a day off from his casual painting job to relax.
It's the end of the day and he's thinking about the hours that he could have spent working (in the past) which are now:
Question 498 NPV, Annuity, perpetuity with growth, multi stage growth model
A business project is expected to cost $100 now (t=0), then pay $10 at the end of the third (t=3), fourth, fifth and sixth years, and then grow by 5% pa every year forever. So the cash flow will be $10.5 at the end of the seventh year (t=7), then $11.025 at the end of the eighth year (t=8) and so on perpetually. The total required return is 10℅ pa.
Which of the following formulas will NOT give the correct net present value of the project?
You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?
Question 792 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate, log-normal distribution, confidence interval
A risk manager has identified that their investment fund’s continuously compounded portfolio returns are normally distributed with a mean of 10% pa and a standard deviation of 40% pa. The fund’s portfolio is currently valued at $1 million. Assume that there is no estimation error in the above figures. To simplify your calculations, all answers below use 2.33 as an approximation for the normal inverse cumulative density function at 99%. All answers are rounded to the nearest dollar. Assume one month is 1/12 of a year. Which of the following statements is NOT correct?
A one year European-style put option has a strike price of $4. The option's underlying stock pays no dividends and currently trades at $5. The risk-free interest rate is 10% pa continuously compounded. Use a single step binomial tree to calculate the option price, assuming that the price could rise to $8 ##(u = 1.6)## or fall to $3.125 ##(d = 1/1.6)## in one year. The put option price now is:
Which type of business organisation has the most checks and balances against the detrimental effects of the principal-agent problem since it's potentially the most exposed?
Find the Macaulay duration of a 2 year 5% pa annual fixed coupon bond which has a $100 face value and currently has a yield to maturity of 8% pa. The Macaulay duration is: