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?
A stock pays semi-annual dividends. It just paid a dividend of $10. The growth rate in the dividend is 1% every 6 months, given as an effective 6 month rate. You estimate that the stock's required return is 21% pa, as an effective annual rate.
Using the dividend discount model, what will be the share price?
Three important classes of investable risky assets are:
- Corporate debt which has low total risk,
- Real estate which has medium total risk,
- Equity which has high total risk.
Assume that the correlation between total returns on:
- Corporate debt and real estate is 0.1,
- Corporate debt and equity is 0.1,
- Real estate and equity is 0.5.
You are considering investing all of your wealth in one or more of these asset classes. Which portfolio will give the lowest total risk? You are restricted from shorting any of these assets. Disregard returns and the risk-return trade-off, pretend that you are only concerned with minimising risk.
Which one of the following will decrease net income (NI) but increase cash flow from assets (CFFA) in this year for a tax-paying firm, all else remaining constant?
Remember:
###NI=(Rev-COGS-FC-Depr-IntExp).(1-t_c )### ###CFFA=NI+Depr-CapEx - ΔNWC+IntExp###Question 606 foreign exchange rate, American and European terms
Which of the following FX quotes (current in October 2015) is given in American terms?
Mr Blue, Miss Red and Mrs Green are people with different utility functions.
Note that a fair gamble is a bet that has an expected value of zero, such as paying $0.50 to win $1 in a coin flip with heads or nothing if it lands tails. Fairly priced insurance is when the expected present value of the insurance premiums is equal to the expected loss from the disaster that the insurance protects against, such as the cost of rebuilding a home after a catastrophic fire.
Which of the following statements is NOT correct?
What derivative position are you exposed to if you have the obligation to sell the underlying asset at maturity, so you will definitely be forced to sell the underlying asset?
This question is about the Balance of Payments. Australia's current account as a percent of nominal gross domestic product (GDP) per annum is shown in the graph below.
Assume that all foreign and domestic assets are either debt which makes interest income or equity which makes dividend income, and vice versa for liabilities which cost interest and dividend payments, respectively.
Which of the following statements is NOT correct?
Question 1011 winners curse
A teacher fills up a large jar with coins. The jar is auctioned among a large class of wealthy accounting students who have never studied economics or finance.
The auction is conducted in the English style, which is as an open-outcry ascending auction. This means that the winning bidder is able to bid, win and pay slightly more than the second highest bidder's private valuation, but less than their own private valuation.
The jar of coins is not allowed to be weighed by students and is filled with different-valued coins so it’s difficult to value. Therefore there is a wide distribution of bidders’ fair value estimates. Students’ bids are purely profit-driven, there is no fame to be gained by being the winner or loser.
Assume that each bidder bids up to their personal estimate of the fair value of the jar of coins without observing the number of other bidders during the auction. The winning bidder is likely to: