Find the sample standard deviation of returns using the data in the table:
| Stock Returns | |
| Year | Return pa |
| 2008 | 0.3 |
| 2009 | 0.02 |
| 2010 | -0.2 |
| 2011 | 0.4 |
The returns above and standard deviations below are given in decimal form.
Which of the following statements about the weighted average cost of capital (WACC) is NOT correct?
Two years ago Fred bought a house for $300,000.
Now it's worth $500,000, based on recent similar sales in the area.
Fred's residential property has an expected total return of 8% pa.
He rents his house out for $2,000 per month, paid in advance. Every 12 months he plans to increase the rental payments.
The present value of 12 months of rental payments is $23,173.86.
The future value of 12 months of rental payments one year ahead is $25,027.77.
What is the expected annual growth rate of the rental payments? In other words, by what percentage increase will Fred have to raise the monthly rent by each year to sustain the expected annual total return of 8%?
Which of the following is NOT a valid method to estimate future revenues or costs in a pro-forma income statement when trying to value a company?
The saying "buy low, sell high" suggests that investors should make a:
Question 559 variance, standard deviation, covariance, correlation
Which of the following statements about standard statistical mathematics notation is NOT correct?
Question 730 DDM, income and capital returns, no explanation
A stock’s current price is $1. Its expected total return is 10% pa and its long term expected capital return is 4% pa. It pays an annual dividend and the next one will be paid in one year. All rates are given as effective annual rates. The dividend discount model is thought to be a suitable model for the stock. Ignore taxes. Which of the following statements about the stock is NOT correct?
Question 784 boot strapping zero coupon yield, forward interest rate, term structure of interest rates
Information about three risk free Government bonds is given in the table below.
| Federal Treasury Bond Data | ||||
| Maturity | Yield to maturity | Coupon rate | Face value | Price |
| (years) | (pa, compounding annually) | (pa, paid annually) | ($) | ($) |
| 1 | 0% | 2% | 100 | 102 |
| 2 | 1% | 2% | 100 | 101.9703951 |
| 3 | 2% | 2% | 100 | 100 |
Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is NOT correct?
Question 803 capital raising, rights issue, initial public offering, on market repurchase, no explanation
Which one of the following capital raisings or payouts involve the sale of shares to existing shareholders only?
A one year European-style call option has a strike price of $4. The option's underlying stock pays no dividends and currently trades at $5. The risk-free interest rate is 10% pa continuously compounded. Use a single step binomial tree to calculate the option price, assuming that the price could rise to $8 ##(u = 1.6)## or fall to $3.125 ##(d = 1/1.6)## in one year. The call option price now is: