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?

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.

To your surprise, you can actually afford to pay $2,000 per month and your mortgage allows early repayments without fees. If you maintain these higher monthly payments, how long will it take to pay off your mortgage?

A firm conducts a two-for-one stock split. Which of the following consequences would **NOT** be expected?

Safe firms with low chances of bankruptcy will tend to have:

The Du Pont formula is:

###\dfrac{\text{Net Profit}}{\text{Sales}} \times \dfrac{\text{Sales}}{\text{Total Assets}} \times \dfrac{\text{Total Assets}}{\text{Owners' Equity}}###

Which of the following statements about the Du Pont formula is **NOT** correct?

**Question 904** option, Black-Scholes-Merton option pricing, option on future on stock index

A **six** month European-style **call** option on six month S&P500 index **futures** has a strike price of **2800** points.

The six month **futures** price on the S&P500 index is currently at **2740.805274** points. The futures underlie the call option.

The S&P500 stock index currently trades at **2700** points. The stock index underlies the futures. The stock index's standard deviation of continuously compounded returns is **25**% pa.

The risk-free interest rate is **5**% pa continuously compounded.

Use the Black-Scholes-Merton formula to calculate the option price. The call option price now is:

**Question 978** comparative advantage in trade, production possibilities curve, no explanation

Arthur and Bindi are the only people on a remote island. Their production possibility curves are shown in the graph.

Assuming that Arthur and Bindi cooperate according to the principles of comparative advantage, what will be their combined production possibilities curve?