Fight Finance

(a) $127.5

(b) $125

(c) $102

(d) $101.98

(e) $100

(a) $10,000,000.00

(b) $8,021,978.02

(c) $976,772.86

(d) $975,935.83

(e) $100,000.00

If the AUD appreciates against the USD, the American terms quote of the AUD will or ?

Two call options are exactly the same, but one matures in one year and the other matures in two years. Which option would you expect to have the higher price, the option which matures or , or should they have the price?

(a) Option premium is another name for option price.

(b) An option contract's price is always changing.

(c) Strike price is another name for exercise price.

(d) An option contract's strike price is always changing.

(e) Call and put option premiums are paid at the start when the option is bought. Call option exercise prices are paid when they are exercised, usually at maturity.

(a) Systematic risk increases.

(b) Idiosyncratic risk increases.

(c) Total risk increases.

(d) Systematic risk decreases.

(e) Idiosyncratic risk decreases.

(a) 12.682503% pa

(b) 12.060201% pa

(c) 12% pa

(d) 11.940397% pa

(e) 3.464102% pa

(a) Buy an investment property with low expected future capital gains and high rental income, funded using a low proportion of debt (mortgage loan);

(b) Rent the investment property to a tenant;

(c) Negative gearing is achieved when the property investment’s annual taxable profit is negative, due to the loan’s interest expense being greater than the net rent (rental revenue less the renting expenses such as maintenance);

(d) Deduct the property’s income loss from the investor’s separate personal wage from labour. This means that the investor will pay less personal income tax than if they didn’t make the levered property investment;

(e) The investment property will be a positive-NPV investment if the capital gains are greater than the income losses on an after-tax, risk-adjusted, present-value basis.

(a) Basis risk makes hedges more risky.

(b) Basis risk can only lead to worse than expected effective dollar prices.

(c) Basis risk only occurs when the future is closed out early, before it matures.

(d) ‘The basis’ is defined as the underlying spot price less the futures price quote ##(S_t - F_{t,T})##.

(e) The futures price of oil will tend to be higher than the spot price due to storage costs, so the basis will tend to be positive for hedgers who long futures contracts.

(a) A long call option always has a positive Delta.

(b) A long put option always has a negative Delta.

(c) A long stock always has a Delta of one.

(d) A long call option always has a positive Gamma.

(e) A long stock always has a Gamma of one.