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Question 25  bond pricing, zero coupon bond, term structure of interest rates, forward interest rate

A European company just issued two bonds, a

  • 2 year zero coupon bond at a yield of 8% pa, and a
  • 3 year zero coupon bond at a yield of 10% pa.

What is the company's forward rate over the third year (from t=2 to t=3)? Give your answer as an effective annual rate, which is how the above bond yields are quoted.



Question 164  implicit interest rate in wholesale credit

A wholesale store offers credit to its customers. Customers are given 60 days to pay for their goods, but if they pay immediately they will get a 1.5% 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 the 60th day. All of the below answer choices are given as effective annual interest rates.



Question 223  CFFA, interest tax shield

Which one of the following will increase the Cash Flow From Assets in this year for a tax-paying firm, all else remaining constant?



Question 234  debt terminology

An 'interest only' loan can also be called a:



Question 313  foreign exchange rate, American and European terms

If the AUD appreciates against the USD, the American terms quote of the AUD will or ?



Question 347  PE ratio, Multiples valuation

Which of the following investable assets are NOT suitable for valuation using PE multiples techniques?



Question 363  income and capital returns, inflation, real and nominal returns and cash flows, real estate

A residential investment property has an expected nominal total return of 8% pa and nominal capital return of 3% pa.

Inflation is expected to be 2% pa. All rates are given as effective annual rates.

What are the property's expected real total, capital and income returns? The answer choices below are given in the same order.



Question 435  option, no explanation

Will the price of a call option on equity or if the standard deviation of returns (risk) of the underlying shares becomes higher?


Question 881  Nixon Shock, Bretton Woods, foreign exchange rate, foreign exchange system history, no explanation

In the ‘Nixon Shock’ on August 15, 1971, the United States government:



Question 931  confidence interval, normal distribution

A stock's returns are normally distributed with a mean of 10% pa and a standard deviation of 20 percentage points pa. What is the 90% confidence interval of returns over the next year? Note that the Z-statistic corresponding to a one-tail:

  • 90% normal probability density function is 1.282.
  • 95% normal probability density function is 1.645.
  • 97.5% normal probability density function is 1.960.

The 90% confidence interval of annual returns is between: