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 |
Stock A has a beta of 0.5 and stock B has a beta of 1. Which statement is NOT correct?
You just signed up for a 30 year fully amortising mortgage loan with monthly payments of $1,500 per month. The interest rate is 9% pa which is not expected to change.
How much did you borrow? After 10 years, how much will be owing on the mortgage? The interest rate is still 9% and is not expected to change.
A company advertises an investment costing $1,000 which they say is underpriced. They say that it has an expected total return of 15% pa, but a required return of only 10% pa. Assume that there are no dividend payments so the entire 15% total return is all capital return.
Assuming that the company's statements are correct, what is the NPV of buying the investment if the 15% return lasts for the next 100 years (t=0 to 100), then reverts to 10% pa after that time? Also, what is the NPV of the investment if the 15% return lasts forever?
In both cases, assume that the required return of 10% remains constant. All returns are given as effective annual rates.
The answer choices below are given in the same order (15% for 100 years, and 15% forever):
A stock's required total return will increase when its:
Question 795 option, Black-Scholes-Merton option pricing, option delta, no explanation
Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the Delta of a European put option?
Question 859 money supply, no explanation
The below table shows Australian monetary aggregates. Note that ‘M3’ is the sum of all the figures in the table and ‘ADI’ stands for Authorised Deposit-taking Institution such as a bank, building society or credit union.
| Australian Monetary Aggregates | ||||||
| March 2017, AUD billions | ||||||
| Currency | Current deposits with banks |
Certificates of deposit issued by banks |
Term deposits with banks |
Other deposits with banks |
Deposits with non-bank ADIs |
M3 |
| 69.3 | 271.6 | 207.2 | 562.3 | 838.7 | 36.9 | 1986.0 |
Source: RBA Statistical Table D3 Monetary Aggregates.
Which of the following statements is NOT correct?
Which of the following statements about the Basel 3 minimum capital requirements is NOT correct? Common equity tier 1 (CET1) comprises the highest quality components of capital that fully satisfy all of the following characteristics:
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:
Question 990 Multiples valuation, EV to EBITDA ratio, enterprise value
A firm has:
2 million shares;
$200 million EBITDA expected over the next year;
$100 million in cash (not included in EV);
1/3 market debt-to-assets ratio is (market assets = EV + cash);
4% pa expected dividend yield over the next year, paid annually with the next dividend expected in one year;
2% pa expected dividend growth rate;
40% expected payout ratio over the next year;10 times EV/EBITDA ratio.
30% corporate tax rate.
The stock can be valued using the EV/EBITDA multiple, dividend discount model, Gordon growth model or PE multiple. Which of the below statements is NOT correct based on an EV/EBITDA multiple valuation?