For a price of $13, Carla will sell you a share paying a dividend of $1 in one year and every year after that forever. The required return of the stock is 10% pa.
| Portfolio Details | ||||||
| Stock | Expected return |
Standard deviation |
Correlation | Beta | Dollars invested |
|
| A | 0.2 | 0.4 | 0.12 | 0.5 | 40 | |
| B | 0.3 | 0.8 | 1.5 | 80 | ||
What is the beta of the above portfolio?
The equations for Net Income (NI, also known as Earnings or Net Profit After Tax) and Cash Flow From Assets (CFFA, also known as Free Cash Flow to the Firm) per year are:
###NI=(Rev-COGS-FC-Depr-IntExp).(1-t_c)###
###CFFA=NI+Depr-CapEx - \varDelta NWC+IntExp###
For a firm with debt, what is the amount of the interest tax shield per year?
Your credit card shows a $600 debt liability. The interest rate is 24% pa, payable monthly. You can't pay any of the debt off, except in 6 months when it's your birthday and you'll receive $50 which you'll use to pay off the credit card. If that is your only repayment, how much will the credit card debt liability be one year from now?
A project has the following cash flows:
| Project Cash Flows | |
| Time (yrs) | Cash flow ($) |
| 0 | -400 |
| 1 | 0 |
| 2 | 500 |
The required return on the project is 10%, given as an effective annual rate.
What is the Internal Rate of Return (IRR) of this project? The following choices are effective annual rates. Assume that the cash flows shown in the table are paid all at once at the given point in time.
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:
After doing extensive fundamental analysis of a company, you believe that their shares are overpriced and will soon fall significantly. The market believes that there will be no such fall.
Which of the following strategies is NOT a good idea, assuming that your prediction is true?
A trader buys one crude oil European style put option contract on the CME expiring in one year with an exercise price of $44 per barrel for a price of $6.64. The crude oil spot price is $40.33. If the trader doesn’t close out her contract before maturity, then at maturity she will have the:
Mr Blue, Miss Red and Mrs Green are people with different utility functions.
Note that a fair gamble is a bet that has an expected value of zero, such as paying $0.50 to win $1 in a coin flip with heads or nothing if it lands tails. Fairly priced insurance is when the expected present value of the insurance premiums is equal to the expected loss from the disaster that the insurance protects against, such as the cost of rebuilding a home after a catastrophic fire.
Which of the following statements is NOT correct?
Question 899 comparative advantage in trade, production possibilities curve, no explanation
Adam and Bella are the only people on a remote island. Their production possibility curves are shown in the graph.
Assume that Adam and Bella cooperate according to the principle of comparative advantage.
Which of the following statements is NOT correct?