A 180-day Bank Accepted Bill has a face value of $1,000,000. The interest rate is 8% pa and there are 365 days in the year. What is its price now?
The security market line (SML) shows the relationship between beta and expected return.
Buying investment projects that plot above the SML would lead to:
According to the theory of the Capital Asset Pricing Model (CAPM), total risk can be broken into two components, systematic risk and idiosyncratic risk. Which of the following events would be considered a systematic, undiversifiable event according to the theory of the CAPM?
A project's Profitability Index (PI) is less than 1. Select the most correct statement:
Which firms tend to have low forward-looking price-earnings (PE) ratios?
Only consider firms with positive earnings, disregard firms with negative earnings and therefore negative PE ratios.
Question 548 equivalent annual cash flow, time calculation, no explanation
An Apple iPhone 6 smart phone can be bought now for $999. An Android Kogan Agora 4G+ smart phone can be bought now for $240.
If the Kogan phone lasts for one year, approximately how long must the Apple phone last for to have the same equivalent annual cost?
Assume that both phones have equivalent features besides their lifetimes, that both are worthless once they've outlasted their life, the discount rate is 10% pa given as an effective annual rate, and there are no extra costs or benefits from either phone.
Which of the following statements about futures contracts on shares is NOT correct, assuming that markets are efficient?
When an equity future is first negotiated (at t=0):
You're considering a business project which costs $11m now and is expected to pay a single cash flow of $11m in one year. So you pay $11m now, then one year later you receive $11m.
Assume that the initial $11m cost is funded using the your firm's existing cash so no new equity or debt will be raised. The cost of capital is 10% pa.
Which of the following statements about the net present value (NPV), internal rate of return (IRR) and payback period is NOT correct?
The risk-weight on "Margin lending against listed instruments on recognised exchanges" is 20% according to APRA's interpretation of the Basel 3 Accord in 'Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk, Attachment A: Risk-weights for on-balance sheet assets'.
A bank is considering lending a $100,000 margin loan secured by an ASX-listed stock. How much regulatory capital will the bank require to grant this loan under the Basel 3 Accord? Ignore the capital conservation buffer and the off-balance sheet exposure.