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You want to buy an apartment priced at $300,000. You have saved a deposit of $30,000. The bank has agreed to lend you the $270,000 as an interest only loan with a term of 25 years. The interest rate is 12% pa and is not expected to change.

What will be your monthly payments? Remember that mortgage payments are paid in arrears (at the end of the month).

Question 30 income and capital returns

A share was bought for $20 (at t=0) and paid its annual dividend of $3 one year later (at t=1). Just after the dividend was paid, the share price was $16 (at t=1). What was the total return, capital return and income return? Calculate your answers as effective annual rates.

The choices are given in the same order: ## r_\text{total},r_\text{capital},r_\text{income} ##.

Question 109 credit rating, credit risk

Bonds with lower (worse) credit ratings tend to have:

Question 547 PE ratio, Multiples valuation, DDM, income and capital returns, no explanation

A firm pays out all of its earnings as dividends. Because of this, the firm has no real growth in earnings, dividends or stock price since there is no re-investment back into the firm to buy new assets and make higher earnings. The dividend discount model is suitable to value this company.

The firm's revenues and costs are expected to increase by inflation in the foreseeable future. The firm has no debt. It operates in the services industry and has few physical assets so there is negligible depreciation expense and negligible net working capital required.

Which of the following statements about this firm's PE ratio is NOT correct? The PE ratio should:

Note: The inverse of x is 1/x.

Question 700 utility, risk aversion, utility function, gamble

Mr Blue, Miss Red and Mrs Green are people with different utility functions.

Each person has $50 of initial wealth. A coin toss game is offered to each person at a casino where the player can win or lose $50. Each player can flip a coin and if they flip heads, they receive $50. If they flip tails then they will lose $50. Which of the following statements is NOT correct?

Question 793 option, hedging, delta hedging, gamma hedging, gamma, Black-Scholes-Merton option pricing

A bank buys 1000 European put options on a $10 non-dividend paying stock at a strike of $12. The bank wishes to hedge this exposure. The bank can trade the underlying stocks and European call options with a strike price of 7 on the same stock with the same maturity. Details of the call and put options are given in the table below. Each call and put option is on a single stock.

European Options on a Non-dividend Paying Stock
Description	Symbol	Put Values	Call Values
Spot price ($)	##S_0##	10	10
Strike price ($)	##K_T##	12	7
Risk free cont. comp. rate (pa)	##r##	0.05	0.05
Standard deviation of the stock's cont. comp. returns (pa)	##\sigma##	0.4	0.4
Option maturity (years)	##T##	1	1
Option price ($)	##p_0## or ##c_0##	2.495350486	3.601466138
##N[d_1]##	##\partial c/\partial S##		0.888138405
##N[d_2]##	##N[d_2]##		0.792946442
##-N[-d_1]##	##\partial p/\partial S##	-0.552034778
##N[-d_2]##	##N[-d_2]##	0.207053558
Gamma	##\Gamma = \partial^2 c/\partial S^2## or ##\partial^2 p/\partial S^2##	0.098885989	0.047577422
Theta	##\Theta = \partial c/\partial T## or ##\partial p/\partial T##	0.348152078	0.672379961

Which of the following statements is NOT correct?

Question 840 gross domestic product

Calculate Australia’s GDP over the 2016 calendar year using the below table:

Australian Gross Domestic Product Components
A$ billion, 2016 Calendar Year from 1 Jan 2016 to 31 Dec 2016 inclusive
Consumption	Investment	Government spending	Exports	Imports
971	421	320	328	344

Source: ABS 5206.0 Australian National Accounts: National Income, Expenditure and Product. Table 3. Expenditure on Gross Domestic Product (GDP), Current prices.

Over the 2016 calendar year, Australia’s GDP was:

Question 894 balance of payments, current account, no explanation

Below are four graphs of Australia's external position, published in the RBA's chart pack.

Assume that all assets and liabilities are debt which makes interest income and equity which makes dividend income.

Which of the following statements is NOT correct? As at the end of 2017, Australia’s:

(a) Trade surplus was roughly zero, so Australians exported as much as they imported.

(b) Net Income was negative, so Australians paid more dividends and interest to foreigners than they received. This is probably because Australia has greater gross foreign liabilities than gross foreign assets.

(c) Current account deficit means Australians have to lend to foreigners by buying foreigners’ debt and equity which represent net capital outflows out of Australia.

(d) Net foreign equity liabilities were negative (less than zero) so Australians had positive net foreign equity assets which means that Australians owned more foreign shares than foreigners owned of Australian shares.

(e) Persistent current account deficit will make its net foreign liabilities greater and greater.

Question 936 CAPM, WACC, IRR

You work for XYZ company and you’ve been asked to evaluate a new project which has double the systematic risk of the company’s other projects.

You use the Capital Asset Pricing Model (CAPM) formula and input the treasury yield ##(r_f )##, market risk premium ##(r_m-r_f )## and the company’s asset beta risk factor ##(\beta_{XYZ} )## into the CAPM formula which outputs a return.

This return that you’ve just found is:

Question 968 foreign exchange rate, forward foreign exchange rate, cross currency interest rate parity, no explanation

Below is a graph showing the spread or difference between government bond yields in different countries compared to the US. Assume that all governments have zero credit risk.

According to the principle of cross-currency interest rate parity, which country is likely to have the greatest expected currency appreciation against the USD over the next 2 years?