# Fight Finance

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Bonds X and Y are issued by the same US company. Both bonds yield 10% pa, and they have the same face value ($100), maturity, seniority, and payment frequency. The only difference is that bond X and Y's coupon rates are 8 and 12% pa respectively. Which of the following statements is true? You want to buy an apartment priced at$500,000. You have saved a deposit of $50,000. The bank has agreed to lend you the$450,000 as an interest only loan with a term of 30 years. The interest rate is 6% pa and is not expected to change. What will be your monthly payments?

A project has the following cash flows:

 Project Cash Flows Time (yrs) Cash flow ($) 0 -90 1 30 2 105 The required return of a project is 10%, given as an effective annual rate. Assume that the cash flows shown in the table are paid all at once at the given point in time. What is the Profitability Index (PI) of the project? Find Scubar Corporation's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.  Scubar Corp Income Statement for year ending 30th June 2013$m Sales 200 COGS 60 Depreciation 20 Rent expense 11 Interest expense 19 Taxable Income 90 Taxes at 30% 27 Net income 63
 Scubar Corp Balance Sheet as at 30th June 2013 2012 $m$m Inventory 60 50 Trade debtors 19 6 Rent paid in advance 3 2 PPE 420 400 Total assets 502 458 Trade creditors 10 8 Bond liabilities 200 190 Contributed equity 130 130 Retained profits 162 130 Total L and OE 502 458

Note: All figures are given in millions of dollars (\$m).

The cash flow from assets was:

Which of the following is the least useful method or model to calculate the value of a real option in a project?

In a takeover deal where the offer is 100% scrip (shares), the merged firm's number of shares will be equal to the sum of the acquirer and target firms' original number of shares. or ?

What is the lowest and highest expected share price and expected return from owning shares in a company over a finite period of time?

Let the current share price be $p_0$, the expected future share price be $p_1$, the expected future dividend be $d_1$ and the expected return be $r$. Define the expected return as:

$r=\dfrac{p_1-p_0+d_1}{p_0}$

The answer choices are stated using inequalities. As an example, the first answer choice "(a) $0≤p<∞$ and $0≤r< 1$", states that the share price must be larger than or equal to zero and less than positive infinity, and that the return must be larger than or equal to zero and less than one.

An investor wants to make a portfolio of two stocks A and B with a target expected portfolio return of 12% pa.

• Stock A has an expected return of 10% pa and a standard deviation of 20% pa.
• Stock B has an expected return of 15% pa and a standard deviation of 30% pa.

The correlation coefficient between stock A and B's expected returns is 70%.

What will be the annual standard deviation of the portfolio with this 12% pa target return?

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?

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?