You just borrowed $400,000 in the form of a 25 year **interest-only** mortgage with monthly payments of $3,000 per month. The interest rate is 9% pa which is not expected to change.

You actually plan to pay more than the required interest payment. You plan to pay $3,300 in mortgage payments every month, which your mortgage lender allows. These extra payments will reduce the principal and the minimum interest payment required each month.

At the maturity of the mortgage, what will be the principal? That is, after the last (300th) interest payment of $3,300 in 25 years, how much will be owing on the mortgage?

Suppose that the US government recently announced that subsidies for fresh milk producers will be gradually phased out over the next year. Newspapers say that there are expectations of a 40% increase in the spot price of fresh milk over the next year.

Option prices on fresh milk trading on the Chicago Mercantile Exchange (CME) reflect expectations of this 40% increase in spot prices over the next year. Similarly to the rest of the market, you believe that prices will rise by 40% over the next year.

What option trades are likely to be profitable, or to be more specific, result in a positive Net Present Value (NPV)?

Assume that:

- Only the spot price is expected to increase and there is no change in expected volatility or other variables that affect option prices.
- No taxes, transaction costs, information asymmetry, bid-ask spreads or other market frictions.

A share just paid its semi-annual dividend of $5. The dividend is expected to grow at 1% every 6 months forever. This 1% growth rate is an effective **6 month** rate.

Therefore the next dividend will be $5.05 in six months. The required return of the stock 8% pa, given as an effective **annual** rate.

What is the price of the share now?

**Question 446** working capital decision, corporate financial decision theory

The working capital decision primarily affects which part of a business?

In February a company sold one December 40,000 pound (about 18 metric tons) lean hog futures contract. It closed out its position in May.

The spot price was $**0.68** per pound in February. The December futures price was $**0.70** per pound when the trader entered into the contract in February, $**0.60** when he closed out his position in May, and $**0.55** when the contract matured in December.

What was the total profit?

**Question 728** inflation, real and nominal returns and cash flows, income and capital returns, no explanation

Which of the following statements about gold is **NOT** correct? Assume that the gold price increases by inflation. Gold:

**Question 796** option, Black-Scholes-Merton option pricing, option delta, no explanation

Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the risk-neutral **probability** that a European **call** option will be exercised?

A company has a 95% daily Value at Risk (VaR) of $1 million. The units of this VaR are in:

An Apple (NASDAQ:AAPL) stock was purchased by an investor for $120 and one year later was sold for $150. A dividend of $4 was also collected at the end of the year just before the stock was sold.

Which of the following statements about the stock investment is **NOT** correct? Ignore taxes.

Over the year, the investor made a:

.