For a price of $6, Carlos will sell you a share which will pay a dividend of $1 in one year and every year after that forever. The required return of the stock is 10% pa.
Bonds X and Y are issued by the same US company. Both bonds yield 10% pa, and they have the same face value ($100), maturity, seniority, and payment frequency.
The only difference is that bond X and Y's coupon rates are 8 and 12% pa respectively. Which of the following statements is true?
Which of the following statements is NOT correct?
In the so called 'Swiss Loans Affair' of the 1980's, Australian banks offered loans denominated in Swiss Francs to Australian farmers at interest rates as low as 4% pa. This was far lower than interest rates on Australian Dollar loans which were above 10% due to very high inflation in Australia at the time.
In the late-1980's there was a large depreciation in the Australian Dollar. The Australian Dollar nearly halved in value against the Swiss Franc. Many Australian farmers went bankrupt since they couldn't afford the interest payments on the Swiss Franc loans because the Australian Dollar value of those payments nearly doubled. The farmers accused the banks of promoting Swiss Franc loans without making them aware of the risks.
What fundamental principal of finance did the Australian farmers (and the bankers) fail to understand?
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?
What type of present value equation is best suited to value a residential house investment property that is expected to pay constant rental payments forever? Note that 'constant' has the same meaning as 'level' in this context.
"Buy low, sell high" is a well-known saying. It suggests that investors should buy low then sell high, in that order.
How would you re-phrase that saying to describe short selling?
Below is a table showing some figures about the Australian labour force.
|Australian Labour Force and Employment Data|
|April 2017 Seasonally Adjusted figures|
|Employed persons ('000)||12 061.9|
|Unemployed persons ('000)||751.4|
|Unemployment rate (%)||5.9|
|Participation rate (%)||64.8|
Source: ABS 6202.0 Labour Force, Australia, Apr 2017
What do you estimate is the size of working age population in thousands (‘000)?