For a price of $13, Carla will sell you a share which will pay a dividend of $1 in one year and every year after that forever. The required return of the stock is 10% pa.

Which statement(s) are correct?

(i) All stocks that plot on the Security Market Line (SML) are fairly priced.

(ii) All stocks that plot above the Security Market Line (SML) are overpriced.

(iii) All fairly priced stocks that plot on the Capital Market Line (CML) have zero idiosyncratic risk.

Select the most correct response:

A four year bond has a face value of $100, a yield of 6% and a fixed coupon rate of 12%, paid semi-annually. What is its price?

A project has the following cash flows. Normally cash flows are assumed to happen at the given time. But here, assume that the cash flows are received smoothly over the year. So the $105 at time 2 is actually earned smoothly from t=1 to t=2:

Project Cash Flows | |

Time (yrs) | Cash flow ($) |

0 | -90 |

1 | 30 |

2 | 105 |

What is the payback period of the project in years?

Select the most correct statement from the following.

'Chartists', also known as 'technical traders', believe that:

A low-quality second-hand car can be bought now for $**1,000** and will last for **1** year before it will be scrapped for nothing.

A high-quality second-hand car can be bought now for $**4,900** and it will last for **5** years before it will be scrapped for nothing.

What is the equivalent annual cost of each car? Assume a discount rate of **10**% pa, given as an effective annual rate.

The answer choices are given as the equivalent annual cost of the low-quality car and then the high quality car.

A trader **buys** one crude oil European style **call** 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:

A bank bill was bought for $99,000 and sold for $100,000 thirty (30) days later. There are 365 days in the year. Which of the following formulas gives the simple interest rate per annum over those 30 days?

Note: To help you identify which is the correct answer without doing any calculations yourself, the formulas used to calculate the numbers are given.