# 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? A wholesale horticulture nursery offers credit to its customers. Customers are given 60 days to pay for their goods, but if they pay immediately they will get a 3% discount. What is the effective interest rate implicit in the discount being offered? Assume 365 days in a year and that all customers pay either immediately or on the 60th day. All rates given below are effective annual rates. Which statement(s) are correct? (i) All stocks that plot on the Security Market Line (SML) are fairly priced. (ii) All stocks that plot above the Security Market Line (SML) are overpriced. (iii) All fairly priced stocks that plot on the Capital Market Line (CML) have zero idiosyncratic risk. Select the most correct response: A firm's WACC before tax would decrease due to: A five year bond has a face value of$100, a yield of 12% and a fixed coupon rate of 6%, paid semi-annually.

What is the bond's price?

A stock has a beta of 0.5. Its next dividend is expected to be \$3, paid one year from now. Dividends are expected to be paid annually and grow by 2% pa forever. Treasury bonds yield 5% pa and the market portfolio's expected return is 10% pa. All returns are effective annual rates.

What is the price of the stock now?

An expansion option is best modeled as a or option?

A timing option is best modeled as a or option?

Question 668  buy and hold, market efficiency, idiom

A quote from the famous investor Warren Buffet: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell."

Buffet is referring to the buy-and-hold strategy which is to buy and never sell shares. Which of the following is a disadvantage of a buy-and-hold strategy? Assume that share markets are semi-strong form efficient. Which of the following is NOT an advantage of the strict buy-and-hold strategy? A disadvantage of the buy-and-hold strategy is that it reduces:

Which of the following is NOT the Australian central bank’s responsibility?