The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.

### P_{0} = \frac{C_1}{r_{\text{eff}} - g_{\text{eff}}} ###

What would you call the expression ## C_1/P_0 ##?

Portfolio Details | ||||||

Stock | Expected return |
Standard deviation |
Correlation | Dollars invested |
||

A | 0.1 | 0.4 | 0.5 | 60 | ||

B | 0.2 | 0.6 | 140 | |||

What is the expected return of the above portfolio?

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 three year bond has a fixed coupon rate of 12% pa, paid semi-annually. The bond's yield is currently 6% pa. The face value is $100. What is its price?

Diversification in a portfolio of two assets works best when the correlation between their returns is:

One formula for calculating a levered firm's free cash flow (FFCF, or CFFA) is to use earnings before interest and tax (EBIT).

###\begin{aligned} FFCF &= (EBIT)(1-t_c) + Depr - CapEx -\Delta NWC + IntExp.t_c \\ &= (Rev - COGS - Depr - FC)(1-t_c) + Depr - CapEx -\Delta NWC + IntExp.t_c \\ \end{aligned} \\###

**Question 662** APR, effective rate, effective rate conversion, no explanation

Which of the following interest rate labels does **NOT** make sense?

Which of the following is **NOT** a valid method for estimating the beta of a company's stock? Assume that markets are efficient, a long history of past data is available, the stock possesses idiosyncratic and market risk. The variances and standard deviations below denote total risks.

Which of the following is **NOT** the Australian central bank’s responsibility?

**Question 989** PE ratio, Multiples valuation, leverage, accounting ratio

A firm has 20 million shares, earnings (or net income) of $100 million per annum and a 60% debt-to-**equity** ratio where both the debt and asset values are market values rather than book values. Similar firms have a PE ratio of 12.

Which of the below statements is **NOT** correct based on a PE multiples valuation?