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A wholesale horticulture nursery offers credit to its customers.

Customers are given 60 days to pay for their goods, but if they pay immediately they will get a 3% discount.

What is the effective interest rate implicit in the discount being offered? Assume 365 days in a year and that all customers pay either immediately or on the 60th day. All rates given below are effective annual rates.

Question 108 bond pricing, zero coupon bond, term structure of interest rates, forward interest rate

An Australian company just issued two bonds:

A 1 year zero coupon bond at a yield of 10% pa, and
A 2 year zero coupon bond at a yield of 8% pa.

What is the forward rate on the company's debt from years 1 to 2? Give your answer as an APR compounding every 6 months, which is how the above bond yields are quoted.

Question 185 NPV, DDM, no explanation

A stock is expected to pay the following dividends:

After year 4, the dividend will grow in perpetuity at 4% pa. The required return on the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.

What will be the price of the stock in 5 years (t = 5), just after the dividend at that time has been paid?

Question 305 option, short selling, speculation

You believe that the price of a share will fall significantly very soon, but the rest of the market does not. The market thinks that the share price will remain the same. Assuming that your prediction will soon be true, which of the following trades is a bad idea? In other words, which trade will NOT make money or prevent losses?

Question 329 DDM, expected and historical returns

In the dividend discount model:

### P_0= \frac{d_1}{r-g} ###

The pronumeral ##g## is supposed to be the:

Question 590 future, market efficiency

Which of the following statements about futures contracts on shares is NOT correct, assuming that markets are efficient?

When an equity future is first negotiated (at t=0):

Question 614 debt terminology

Question 625 dividend re-investment plan, capital raising

Which of the following statements about dividend re-investment plans (DRP's) is NOT correct?

Question 644 future, no explanation

A trader sells one crude oil futures contract on the CME expiring in one year with a locked-in futures price of $38.94 per barrel. The crude oil spot price is $40.33. If the trader doesn’t close out her contract before expiry then in one year she will have the:

Question 988 variance, covariance, beta, CAPM, risk, no explanation

Price Data Time Series
Sourced from Yahoo Finance Historical Price Data
Date	S&P500 Index (^GSPC)					Apple (AAPL)
Date	Open	High	Low	Close	Adj close	Open	High	Low	Close	Adj close
2007, Wed 3 Jan	1418	1429	1408	1417	1417	12.33	12.37	11.7	11.97	10.42
2008, Wed 2 Jan	1468	1472	1442	1447	1447	28.47	28.61	27.51	27.83	24.22
2009, Fri 2 Jan	903	935	899	932	932	12.27	13.01	12.17	12.96	11.28
2010, Mon 4 Jan	1117	1134	1117	1133	1133	30.49	30.64	30.34	30.57	26.6

Source: Yahoo Finance.

Which of the following statements about the above table which is used to calculate Apple's equity beta is NOT correct?

Cash Flows of a Stock

Time (yrs)

Dividend ($)