Question 235 SML, NPV, CAPM, risk
The security market line (SML) shows the relationship between beta and expected return.
Investment projects that plot on the SML would have:
Which of the following statements is NOT equivalent to the yield on debt?
Assume that the debt being referred to is fairly priced, but do not assume that it's priced at par.
A large proportion of a levered firm's assets is cash held at the bank. The firm is financed with half equity and half debt.
Which of the following statements about this firm's enterprise value (EV) and total asset value (V) is NOT correct?
Question 604 inflation, real and nominal returns and cash flows
Apples and oranges currently cost $1 each. Inflation is 5% pa, and apples and oranges are equally affected by this inflation rate. Note that when payments are not specified as real, as in this question, they're conventionally assumed to be nominal.
Which of the following statements is NOT correct?
A trader buys one crude oil European style call option contract on the CME expiring in one year with an exercise price of $44 per barrel for a price of $6.64. The crude oil spot price is $40.33. If the trader doesn’t close out her contract before maturity, then at maturity she will have the:
Question 664 real and nominal returns and cash flows, inflation, no explanation
What is the present value of real payments of $100 every year forever, with the first payment in one year? The nominal discount rate is 7% pa and the inflation rate is 4% pa.
Question 882 Asian currency crisis, foreign exchange rate, original sin, no explanation
In the 1997 Asian currency crisis, the businesses most vulnerable to bankruptcy were those that: