Fight Finance

(a) Common equity in a listed public mining extraction company that will cease operations, wind up, and return all capital to shareholders in one year when its sole gold mine becomes depleted.

(b) Common equity in a small private owner-operated mining services company whose main asset is its sole tanker truck which delivers fuel to mines. The firm's shares are 100% owned by Bob, the driver of the tanker truck.

(c) Common equity in a large listed public company in the banking industry.

(d) Residential apartment real estate.

(e) Commercial warehouse real estate.

(a) Highly liquid publically listed firms.

(b) Firms in a declining industry with very low or negative earnings growth.

(c) Firms expected to have temporarily low earnings over the next year, but with higher earnings later.

(d) Firms whose returns have a very low level of systematic risk.

(e) Firms whose assets include a very large proportion of cash.

(a) Income and capital returns both rise over time.

(b) Income and capital returns both fall over time.

(c) Income return rises and its capital return falls over time.

(d) Income return falls and its capital return rises over time.

(e) Income and capital returns are constant through time.

(a) A long call option's payoff at maturity is equal to the maximum of zero or the underlying asset price at maturity minus the exercise price. ##f_\text{T,LC} = max(S_T - K, 0)##

(b) A long call option's profit is equal to the payoff at maturity less the initial option price. ##\pi_\text{LC} = max(S_T - K, 0) - c_0##

(c) The breakeven price is the underlying asset price at which a long option contract gives zero profit. When ##max(S_T - K, 0) - c_0 = 0##, then ##S_T = K+c_0##.

(d) A call option's break-even price is always more than its strike price.

(e) Call options should only be exercised at maturity if the underlying asset price is above the break-even price.

(a) Asset revaluation reserve.

(b) Foreign currency translation reserve.

(c) Retained earnings, also known as retained profits.

(d) Contributed equity, also known as paid up capital.

(e) General reserve.

(a) 276 months, which is 23 years.

(b) 234 months, which is 19 years and 6 months.

(c) 220 months, which is 18 years and 4 months.

(d) 184 months, which is 15 years and 4 months.

(e) 156 months, which is 13 years.

If future required returns rise, and future expected cash flows remain the same, then prices will , or remain the ?

(a) The Macaulay duration of the bond is 10.5 years.

(b) If yields-to-maturity suddenly rose by 1 percentage point then bond prices would suddenly fall by 10% or less.

(c) If yields-to-maturity suddenly fell by 2 percentage points then bond prices would suddenly rise by 20% or less.

(d) If the bond is a zero-coupon bond then its maturity is 10.5 years.

(e) The duration-price-change formula assumes parallel shifts in the yield curve.

(a) 6.08 pp pa

(b) 15.2 pp pa

(c) 21.28 pp pa

(d) 27.36 pp pa

(e) 41.13 pp pa

(a) Arthur’s opportunity cost of picking one date per hour is 0.25 coconuts.

(b) Bindi’s opportunity cost of picking one date per hour is 2 coconuts.

(c) Arthur’s opportunity cost of picking one coconut per hour is 4 dates.

(d) Bindi’s opportunity cost of picking one coconut per hour is 2 dates.

(e) The gradients (rise over run) of the lines in the graph are measured in coconuts per one date per hour.