A two year Government bond has a face value of $100, a yield of 0.5% and a fixed coupon rate of 0.5%, paid semi-annually. What is its price?

The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.

### p_0 = \frac{d_1}{r - g} ###

Which expression is **NOT** equal to the expected dividend yield?

A project's NPV is positive. Select the most correct statement:

The CAPM can be used to find a business's expected opportunity cost of capital:

###r_i=r_f+β_i (r_m-r_f)###

What should be used as the risk free rate ##r_f##?

An Apple iPhone 6 smart phone can be bought now for $**999**. An Android Samsung Galaxy 5 smart phone can be bought now for $**599**.

If the Samsung phone lasts for **four** years, approximately how long must the Apple phone last for to have the same equivalent annual cost?

Assume that both phones have equivalent features besides their lifetimes, that both are worthless once they've outlasted their life, the discount rate is **10**% pa given as an effective annual rate, and there are no extra costs or benefits from either phone.

An investor wants to make a portfolio of two stocks A and B with a target expected portfolio return of **6**% pa.

- Stock A has an expected return of
**5**% pa. - Stock B has an expected return of
**10**% pa.

What portfolio weights should the investor have in stocks A and B respectively?

An equity index is currently at **5,000** points. The **2** year futures price is **5,400** points and the total required return is **8**% pa with continuous compounding. Each index point is worth $**25**.

What is the implied continuous dividend yield as a continuously compounded rate per annum?

**Question 792** mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate, log-normal distribution, confidence interval

A risk manager has identified that their investment fund’s continuously compounded portfolio returns are normally distributed with a mean of **10**% pa and a standard deviation of **40**% pa. The fund’s portfolio is currently valued at $**1** million. Assume that there is no estimation error in the above figures. To simplify your calculations, all answers below use **2.33** as an approximation for the normal inverse cumulative density function at 99%. All answers are rounded to the nearest dollar. Assume one month is 1/12 of a year. Which of the following statements is **NOT** correct?

What is the Cash Conversion Cycle for a firm with a:

- Payables period of 1 day;
- Inventory period of 50 days; and
- Receivables period of 30 days?

All answer options are in days:

You work for XYZ company and you’ve been asked to evaluate a new project which has **double** the systematic risk of the company’s other projects.

You use the Capital Asset Pricing Model (CAPM) formula and input the treasury yield ##(r_f )##, market risk premium ##(r_m-r_f )## and the company’s asset beta risk factor ##(\beta_{XYZ} )## into the CAPM formula which outputs a return.

This return that *you’ve just found* is: