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Question 382  Merton model of corporate debt, real option, option

In the Merton model of corporate debt, buying a levered company's shares is equivalent to:



Question 443  corporate financial decision theory, investment decision, financing decision, working capital decision, payout policy

Business people make lots of important decisions. Which of the following is the most important long term decision?



Question 618  capital structure, no explanation

Who owns a company's shares? The:



Question 690  option

A trader just bought a European style put option on CBA stock. The current option premium is $2, the exercise price is $75, the option matures in one year and the spot CBA stock price is $74.

Which of the following statements is NOT correct?



Question 797  option, Black-Scholes-Merton option pricing, option delta, no explanation

Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the risk-neutral probability that a European put option will be exercised?



Question 815  expected and historical returns

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


Question 829  option, future, delta, gamma, theta, no explanation

Below are some statements about futures and European-style options on non-dividend paying stocks. Assume that the risk free rate is always positive. Which of these statements is NOT correct? All other things remaining equal:



Question 877  arithmetic and geometric averages, utility, utility function

Gross discrete returns in different states of the world are presented in the table below. A gross discrete return is defined as ##P_1/P_0##, where ##P_0## is the price now and ##P_1## is the expected price in the future. An investor can purchase only a single asset, A, B, C or D. Assume that a portfolio of assets is not possible.

Gross Discrete Returns
In Different States of the World
Investment World states (probability)
asset Good (50%) Bad (50%)
A 2 0.5
B 1.1 0.9
C 1.1 0.95
D 1.01 1.01
 

 

Which of the following statements about the different assets is NOT correct? Asset:



Question 915  price gains and returns over time, IRR, NPV, income and capital returns, effective return

For a share price to double over 7 years, what must its capital return be as an effective annual rate?



Question 945  stock split, bonus issue, stock dividend

A 3-for-2 stock split is equivalent to a 1-for-2 bonus issue or a 200% stock dividend. or ?