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} ##.
A project has an internal rate of return (IRR) which is greater than its required return. Select the most correct statement.
In the dividend discount model:
###P_0 = \dfrac{C_1}{r-g}###
The return ##r## is supposed to be the:
Which of the following statements is NOT equivalent to the yield on debt?
Assume that the debt being referred to is fairly priced, but do not assume that it's priced at par.
A young lady is trying to decide if she should attend university or not.
The young lady's parents say that she must attend university because otherwise all of her hard work studying and attending school during her childhood was a waste.
What's the correct way to classify this item from a capital budgeting perspective when trying to decide whether to attend university?
The hard work studying at school in her childhood should be classified as:
Question 539 debt terminology, fully amortising loan, bond pricing
A 'fully amortising' loan can also be called a:
Which one of the below option and futures contracts gives the possibility of potentially unlimited gains?
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: