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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 109  credit rating, credit risk

Bonds with lower (worse) credit ratings tend to have:



Question 152  NPV, Annuity

The following cash flows are expected:

  • 10 yearly payments of $80, with the first payment in 3 years from now (first payment at t=3).
  • 1 payment of $600 in 5 years and 6 months (t=5.5) from now.

What is the NPV of the cash flows if the discount rate is 10% given as an effective annual rate?



Question 245  foreign exchange rate, monetary policy, foreign exchange rate direct quote, no explanation

Investors expect Australia's central bank, the RBA, to leave the policy rate unchanged at their next meeting.

Then unexpectedly, the policy rate is reduced due to fears that Australia's GDP growth is slowing.

What do you expect to happen to Australia's exchange rate? Direct and indirect quotes are given from the perspective of an Australian.

The Australian dollar will:



Question 283  portfolio risk, correlation, needs refinement

Three important classes of investable risky assets are:

  • Corporate debt which has low total risk,
  • Real estate which has medium total risk,
  • Equity which has high total risk.

Assume that the correlation between total returns on:

  • Corporate debt and real estate is 0.1,
  • Corporate debt and equity is 0.1,
  • Real estate and equity is 0.5.

You are considering investing all of your wealth in one or more of these asset classes. Which portfolio will give the lowest total risk? You are restricted from shorting any of these assets. Disregard returns and the risk-return trade-off, pretend that you are only concerned with minimising risk.



Question 395  real option, option

The cheapest mobile phones available tend to be those that are 'locked' into a cell phone operator's network. Locked phones can not be used with other cell phone operators' networks.

Locked mobile phones are cheaper than unlocked phones because the locked-in network operator helps create a monopoly by:



Question 472  quick ratio, accounting ratio

A firm has current assets totaling $1.5b of which cash is $0.25b and inventories is $0.5b. Current liabilities total $2b of which accounts payable is $1b.

What is the firm's quick ratio, also known as the acid test ratio?



Question 702  utility, risk aversion, utility function, gamble

Mr Blue, Miss Red and Mrs Green are people with different utility functions.

Each person has $50 of initial wealth. A coin toss game is offered to each person at a casino where the player can win or lose $50. Each player can flip a coin and if they flip heads, they receive $50. If they flip tails then they will lose $50. Which of the following statements is NOT correct?

Utility curves



Question 829  option, future, delta, gamma, theta, no explanation

Below are some statements about futures and European-style options on non-dividend paying stocks. Assume that the risk free rate is always positive. Which of these statements is NOT correct?



Question 851  labour force, no explanation

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)?




Copyright © 2014 Keith Woodward