Suppose you had $100 in a savings account and the interest rate was 2% per year.

After 5 years, how much do you think you would have in the account if you left the money to grow?

**Question 278** inflation, real and nominal returns and cash flows

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.

Which of the below formulas gives the payoff at maturity ##(f_T)## from being **long** a future? Let the underlying asset price at maturity be ##S_T## and the locked-in futures price be ##K_T##.

Which of the below formulas gives the profit ##(\pi)## from being **short** a **call** option? Let the underlying asset price at maturity be ##S_T##, the exercise price be ##X_T## and the option price be ##f_{LC,0}##. Note that ##S_T##, ##X_T## and ##f_{LC,0}## are all positive numbers.

Which of the following interest rate quotes is **NOT** equivalent to a **10**% effective annual rate of return? Assume that each year has 12 months, each month has 30 days, each day has 24 hours, each hour has 60 minutes and each minute has 60 seconds. APR stands for Annualised Percentage Rate.

**Question 737** financial statement, balance sheet, income statement

Where can a publicly listed firm's book value of equity be found? It can be sourced from the company's:

**Question 795** option, Black-Scholes-Merton option pricing, option delta, no explanation

Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the **Delta** of a European **put** option?

Being long a call and short a put which have the same exercise prices and underlying stock is equivalent to being:

**Question 869** economic order quantity

A Queensland farmer grows strawberries in greenhouses and supplies Australian supermarkets all year round. The farmer must decide how often he should contract the truck driver to deliver his strawberries and how many boxes to send on each delivery. The farmer:

- Sells
**100,000**boxes of strawberries per year; - Incurs holding costs (refrigeration and spoilage) of $
**16**per box per year; and - Must pay the truck driver delivery fees at $
**0.20**per box plus a $**500**fixed fee per delivery.

Which of the following statements about the Economic Order Quantity is **NOT** correct?

**Question 987** interest tax shield, capital structure, debt terminology, no explanation

What creates interest tax shields for a company?