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Bonds A and B are issued by the same company. They have the same face value, maturity, seniority and coupon payment frequency. The only difference is that bond A has a 5% coupon rate, while bond B has a 10% coupon rate. The yield curve is flat, which means that yields are expected to stay the same.

Which bond would have the higher current price?

A 2 year government bond yields 5% pa with a coupon rate of 6% pa, paid semi-annually.

Find the effective six month rate, effective annual rate and the effective daily rate. Assume that each month has 30 days and that there are 360 days in a year.

All answers are given in the same order:

$r_\text{eff semi-annual}$, $r_\text{eff yrly}$, $r_\text{eff daily}$.

The following is the Dividend Discount Model (DDM) used to price stocks:

$$P_0=\dfrac{C_1}{r-g}$$

If the assumptions of the DDM hold, which one of the following statements is NOT correct? The long term expected:

A bank grants a borrower an interest-only residential mortgage loan with a very large 50% deposit and a nominal interest rate of 6% that is not expected to change. Assume that inflation is expected to be a constant 2% pa over the life of the loan. Ignore credit risk.

From the bank's point of view, what is the long term expected nominal capital return of the loan asset?

In a takeover deal where the offer is 100% scrip (shares), the merged firm's number of shares will be equal to the sum of the acquirer and target firms' original number of shares. or ?

A risky firm will last for one period only (t=0 to 1), then it will be liquidated. So it's assets will be sold and the debt holders and equity holders will be paid out in that order. The firm has the following quantities:

$V$ = Market value of assets.

$E$ = Market value of (levered) equity.

$D$ = Market value of zero coupon bonds.

$F_1$ = Total face value of zero coupon bonds which is promised to be paid in one year.

What is the payoff to equity holders at maturity, assuming that they keep their shares until maturity?

Which of the following quantities is commonly assumed to be normally distributed?

If a firm makes a profit and pays no dividends, which of the firm’s accounts will increase?

Where can a private firm's market value of equity be found? It can be sourced from the company's:

Which of the following assets would you expect to have the highest required rate of return? All values are current market values.