Fight Finance

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royal ne...$750.00
ZOE HY$640.00

Question 5  DDM

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.

Would you like to his share or politely ?

Question 53  bond pricing

A two year Government bond has a face value of $100, a yield of 2.5% pa and a fixed coupon rate of 0.5% pa, paid semi-annually. What is its price?

Question 131  APR, effective rate

Calculate the effective annual rates of the following three APR's:

  • A credit card offering an interest rate of 18% pa, compounding monthly.
  • A bond offering a yield of 6% pa, compounding semi-annually.
  • An annual dividend-paying stock offering a return of 10% pa compounding annually.

All answers are given in the same order:

##r_\text{credit card, eff yrly}##, ##r_\text{bond, eff yrly}##, ##r_\text{stock, eff yrly}##

Question 201  DDM, income and capital returns

The following is the Dividend Discount Model (DDM) used to price stocks:


If the assumptions of the DDM hold, which one of the following statements is NOT correct? The long term expected:

Question 381  Merton model of corporate debt, option, real option

In the Merton model of corporate debt, buying a levered company's debt is equivalent to buying risk free government bonds and:

Question 430  option, no explanation

A European call option will mature in ##T## years with a strike price of ##K## dollars. The underlying asset has a price of ##S## dollars.

What is an expression for the payoff at maturity ##(f_T)## in dollars from having written (being short) the call option?

Question 639  option, option payoff at maturity, no explanation

Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being short a put option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.

Question 716  return distribution

The below three graphs show probability density functions (PDF) of three different random variables Red, Green and Blue.

PDF graph

Which of the below statements is NOT correct?

Question 762  equivalent annual cash flow, no explanation offers the Apple iphone 5S smart phone for rent at $12.95 per week paid in advance on a 2 year contract. After renting the phone, you must return it to Radio-Rentals. offers the Apple iphone 5S smart phone for sale at $699. You estimate that the phone will last for 3 years before it will break and be worthless.

Currently, the effective annual interest rate is 11.351%, the effective monthly interest rate 0.9% and the effective weekly interest rate is 0.207%. Assume that there are exactly 52 weeks per year and 12 months per year.

Find the equivalent annual cost of renting the phone and also buying the phone. The answers below are listed in the same order.

Question 910  money market

Which of the following is NOT a money market security?

Copyright © 2014 Keith Woodward