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Question 306  risk, standard deviation

Let the standard deviation of returns for a share per month be ##\sigma_\text{monthly}##.

What is the formula for the standard deviation of the share's returns per year ##(\sigma_\text{yearly})##?

Assume that returns are independently and identically distributed (iid) so they have zero auto correlation, meaning that if the return was higher than average today, it does not indicate that the return tomorrow will be higher or lower than average.



Question 381  Merton model of corporate debt, option, real option

In the Merton model of corporate debt, buying a levered company's debt is equivalent to buying risk free government bonds and:



Question 427  takeover

In a takeover deal where the offer is 100% cash, the merged firm's number of shares will be equal to the acquirer firm's original number of shares. or ?


Question 435  option, no explanation

Will the price of a call option on equity or if the standard deviation of returns (risk) of the underlying shares becomes higher?


Question 556  portfolio risk, portfolio return, standard deviation

An investor wants to make a portfolio of two stocks A and B with a target expected portfolio return of 12% pa.

  • Stock A has an expected return of 10% pa and a standard deviation of 20% pa.
  • Stock B has an expected return of 15% pa and a standard deviation of 30% pa.

The correlation coefficient between stock A and B's expected returns is 70%.

What will be the annual standard deviation of the portfolio with this 12% pa target return?



Question 634  continuously compounding rate

A $100 stock has a continuously compounded expected total return of 10% pa. Its dividend yield is 2% pa with continuous compounding. What do you expect its price to be in one year?



Question 712  effective rate conversion

An effective monthly return of 1% ##(r_\text{eff monthly})## is equivalent to an effective annual return ##(r_\text{eff annual})## of:



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?



Question 846  monetary policy, fiscal policy

Below is the Australian central bank’s cash rate.

Graph

From 2011 to 2017 the Australian central bank has implemented:



Question 867  limited liability, business structure

Which one of the following businesses is likely to be a public company in Australia, judging by its name?