A project to build a toll road will take **3** years to complete, costing three payments of $**50** million, paid at the start of each year (at times 0, 1, and 2).

After completion, the toll road will yield a constant $**10** million at the end of each year forever with no costs. So the first payment will be at t=**4**.

The required return of the project is 10% pa given as an effective nominal rate. All cash flows are nominal.

What is the **payback period**?

When someone says that they're "buying American dollars" (USD), what type of asset are they probably buying? They're probably buying:

A **10** year Australian government bond was just issued at **par** with a yield of **3.9**% pa. The fixed coupon payments are **semi-annual**. The bond has a face value of $**1,000**.

**Six months** later, just **after** the first coupon is paid, the yield of the bond decreases to **3.65**% pa. What is the bond's **new price**?

**Question 543** price gains and returns over time, IRR, NPV, income and capital returns, effective return

For an asset price to **triple** every **5** years, what must be the expected future capital return, given as an effective annual rate?

An American wishes to convert **USD 1 million** to Australian dollars (AUD). The exchange rate is **0.8 USD per AUD**. How much is the USD 1 million worth in AUD?

**Question 748** income and capital returns, DDM, ex dividend date

A stock will pay you a dividend of $**2** tonight if you buy it **today**.

Thereafter the annual dividend is expected to grow by **3**% pa, so the next dividend after the $2 one tonight will be $2.06 in one year, then in two years it will be $2.1218 and so on. The stock's required return is 8% pa.

What is the stock price today and what do you expect the stock price to be tomorrow, approximately?

You intend to use futures on oil to hedge the risk of purchasing oil. There is no cross-hedging risk. Oil pays no dividends but it’s costly to store. Which of the following statements about basis risk in this scenario is **NOT** correct?

**Question 833** option, delta, theta, standard deviation, no explanation

Which of the following statements about an option (either a call or put) and its underlying stock is **NOT** correct?

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:

Find the Macaulay duration of a **2** year **5**% pa **annual** fixed coupon bond which has a $**100** face value and currently has a yield to maturity of 8% pa. The Macaulay duration is: