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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

Question 271 CAPM, option, risk, systematic risk, systematic and idiosyncratic risk

All things remaining equal, according to the capital asset pricing model, if the systematic variance of an asset increases, its required return will increase and its price will decrease.
If the idiosyncratic variance of an asset increases, its price will be unchanged.

What is the relationship between the price of a call or put option and the total, systematic and idiosyncratic variance of the underlying asset that the option is based on? Select the most correct answer.

Call and put option prices increase when the:

Question 282 expected and historical returns, income and capital returns

You're the boss of an investment bank's equities research team. Your five analysts are each trying to find the expected total return over the next year of shares in a mining company. The mining firm:

Is regarded as a mature company since it's quite stable in size and was floated around 30 years ago. It is not a high-growth company;
Share price is very sensitive to changes in the price of the market portfolio, economic growth, the exchange rate and commodities prices. Due to this, its standard deviation of total returns is much higher than that of the market index;
Experienced tough times in the last 10 years due to unexpected falls in commodity prices.
Shares are traded in an active liquid market.

Your team of analysts present their findings, and everyone has different views. While there's no definitive true answer, whose calculation of the expected total return is the most plausible? Assume that:

The analysts' source data is correct and true, but their inferences might be wrong;
All returns and yields are given as effective annual nominal rates.

(a) Alice says 5% pa since she calculated that this was the average total yield on government bonds over the last 10 years. She says that this is also the expected total yield implied by current prices on one year government bonds.

(b) Bob says 4% pa since he calculated that this was the average total return on the mining stock over the last 10 years.

(c) Cate says 3% pa since she calculated that this was the average growth rate of the share price over the last 10 years.

(d) Dave says 6% pa since he calculated that this was the average growth rate of the share market price index (not the accumulation index) over the last 10 years.

(e) Eve says 15% pa since she calculated that this was the discount rate implied by the dividend discount model using the current share price, forecast dividend in one year and a 3% growth rate in dividends thereafter, which is the expected long term inflation rate.

Question 359 CFFA

Which one of the following will have no effect on net income (NI) but decrease cash flow from assets (CFFA or FFCF) in this year for a tax-paying firm, all else remaining constant?

Remember:

###NI=(Rev-COGS-FC-Depr-IntExp).(1-t_c )### ###CFFA=NI+Depr-CapEx - ΔNWC+IntExp###

Question 388 real option, option

A moped is a bicycle with pedals and a little motor that can be switched on to assist the rider. Mopeds are useful for quick transport using the motor, and for physical exercise when using the pedals unassisted. This offers the rider:

Question 478 income and capital returns

Total cash flows can be broken into income and capital cash flows. What is the name given to the income cash flow from owning shares?

Question 490 expected and historical returns, accounting ratio

Which of the following is NOT a synonym of 'required return'?

Question 506 leverage, accounting ratio

A firm has a debt-to-equity ratio of 25%. What is its debt-to-assets ratio?

Question 587 option

Which of the following statements about option contracts is NOT correct? For every:

Question 693 boot strapping zero coupon yield, forward interest rate, term structure of interest rates

Information about three risk free Government bonds is given in the table below.

Federal Treasury Bond Data
Maturity	Yield to maturity	Coupon rate	Face value	Price
(years)	(pa, compounding semi-annually)	(pa, paid semi-annually)	($)	($)
0.5	3%	4%	100	100.4926
1	4%	4%	100	100.0000
1.5	5%	4%	100	98.5720

Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is NOT correct?