The required return of a project is 10%, given as an effective annual rate. Assume that the cash flows shown in the table are paid all at once at the given point in time.
What is the Profitability Index (PI) of the project?
Project Cash Flows | |
Time (yrs) | Cash flow ($) |
0 | -100 |
1 | 0 |
2 | 121 |
What is the Internal Rate of Return (IRR) of the project detailed in the table below?
Assume that the cash flows shown in the table are paid all at once at the given point in time. All answers are given as effective annual rates.
Project Cash Flows | |
Time (yrs) | Cash flow ($) |
0 | -100 |
1 | 0 |
2 | 121 |
Bonds X and Y are issued by different companies, but they both pay a semi-annual coupon of 10% pa and they have the same face value ($100) and maturity (3 years).
The only difference is that bond X and Y's yields are 8 and 12% pa respectively. Which of the following statements is true?
Your main expense is fuel for your car which costs $100 per month. You just refueled, so you won't need any more fuel for another month (first payment at t=1 month).
You have $2,500 in a bank account which pays interest at a rate of 6% pa, payable monthly. Interest rates are not expected to change.
Assuming that you have no income, in how many months time will you not have enough money to fully refuel your car?
A stock is expected to pay a dividend of $1 in one year. Its future annual dividends are expected to grow by 10% pa. So the first dividend of $1 is in one year, and the year after that the dividend will be $1.1 (=1*(1+0.1)^1), and a year later $1.21 (=1*(1+0.1)^2) and so on forever.
Its required total return is 30% pa. The total required return and growth rate of dividends are given as effective annual rates. The stock is fairly priced.
Calculate the pay back period of buying the stock and holding onto it forever, assuming that the dividends are received as at each time, not smoothly over each year.
A firm wishes to raise $50 million now. They will issue 5% pa semi-annual coupon bonds that will mature in 3 years and have a face value of $100 each. Bond yields are 6% pa, given as an APR compounding every 6 months, and the yield curve is flat.
How many bonds should the firm issue?
Question 809 Markowitz portfolio theory, CAPM, Jensens alpha, CML, systematic and idiosyncratic risk
A graph of assets’ expected returns ##(\mu)## versus standard deviations ##(\sigma)## is given in the graph below. The CML is the capital market line.
Which of the following statements about this graph, Markowitz portfolio theory and the Capital Asset Pricing Model (CAPM) theory is NOT correct?
Question 811 log-normal distribution, mean and median returns, return distribution, arithmetic and geometric averages
Which of the following statements about probability distributions is NOT correct?
The present value of an annuity of 3 annual payments of $5,000 in arrears (at the end of each year) is $12,434.26 when interest rates are 10% pa compounding annually.
If the same amount of $12,434.26 is put in the bank at the same interest rate of 10% pa compounded annually and the same cash flow of $5,000 is withdrawn at the end of every year, how much money will be in the bank in 3 years, just after that third $5,000 payment is withdrawn?
A Malaysian man wishes to convert 1 million Malaysian Ringgit (MYR) into Indian Rupees (IND). The exchange rate is 4.2 MYR per USD and 71 IND per USD. How much is the MYR 1 million worth in IND?