Fight Finance

Would you like to Carla's share or politely ?

Would you like to the shares or politely ?

(a) 0

(b) 0.5

(c) 1

(d) 1.5

(e) 2

(a) CapEx is added in the Net Income (NI) equation so it needs subtracting in the CFFA equation.

(b) CapEx is a financing cash flow that needs to be ignored. Therefore it should be subtracted.

(c) CapEx is not a cash flow, it's a non-cash expense made up by accountants that needs to be subtracted.

(d) CapEx is subtracted to account for the net cash spent on capital assets.

(e) CapEx is subtracted because it's too hard to predict, therefore we exclude it.

(a) A positive NPV and should be accepted.

(b) A zero NPV.

(c) A negative NPV and should be rejected.

(d) A large amount of diversifiable risk.

(e) Zero diversifiable risk.

(a) Short sellers benefit from price falls.

(b) To short sell, you must borrow the asset from person A and sell it to person B, then later on buy an identical asset from person C and return it to person A.

(c) Short selling only works for assets that are 'fungible' which means that there are many that are identical and substitutable, such as shares and bonds and unlike real estate.

(d) An investor who short-sells an asset has a negative weight in that asset.

(e) An investor who short-sells an asset is said to be 'long' that asset.

(a) Sell any of the firm's shares that you already own.

(b) Short-sell the firm's shares.

(c) Sell futures written on the shares.

(d) Buy put options written on the shares.

(e) Buy call options written on the shares.

(a) The number of shares will rise by 2/7 or around 28.5714%.

(b) The share price will fall by 2/7 or around 28.5714%.

(c) If you don't take part in the rights issue and it's non-renounceable, you will lose around $0.6667 per share.

(d) The firm’s market capitalisation of equity will rise by 20/91 or around 21.9780%.

(e) The company will have more cash.

If future required returns fall, 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.