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Question 6  DDM

For a price of $102, Andrea will sell you a share which just paid a dividend of $10 yesterday, and is expected to pay dividends every year forever, growing at a rate of 5% pa.

So the next dividend will be ##10(1+0.05)^1=$10.50## in one year from now, and the year after it will be ##10(1+0.05)^2=11.025## and so on.

The required return of the stock is 15% pa.

Would you like to the share or politely ?


Question 147  bill pricing, simple interest rate, no explanation

A 30-day Bank Accepted Bill has a face value of $1,000,000. The interest rate is 8% pa and there are 365 days in the year. What is its price now?



Question 276  derivative terminology, option

The 'option strike price' in an option contract, also known as the exercise price, is paid at the start when the option contract is agreed to. or ?


Question 278  inflation, real and nominal returns and cash flows

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.

After one year, would you be able to buy , exactly the as or than today with the money in this account?


Question 403  PE ratio, no explanation

Which of the following investable assets is the LEAST suitable for valuation using PE multiples techniques?



Question 438  option, no explanation

Two put options are exactly the same, but one matures in one year and the other matures in two years. Which option would you expect to have the higher price, the option which matures or , or should they have the price?


Question 516  corporate financial decision theory

Which of the following decisions relates to the current assets and current liabilities of the firm?



Question 587  option

Which of the following statements about option contracts is NOT correct? For every:



Question 817  expected and historical returns, income and capital returns

Over the last year, a constant-dividend-paying stock's price fell, while it's future expected dividends and profit remained the same. Assume that:

  • Now is ##t=0##, last year is ##t=-1## and next year is ##t=1##;
  • The dividend is paid at the end of each year, the last dividend was just paid today ##(C_0)## and the next dividend will be paid next year ##(C_1)##;
  • Markets are efficient and the dividend discount model is suitable for valuing the stock.

Which of the following statements is NOT correct? The stock's:



Question 958  confidence interval, normal distribution

A stock's returns are normally distributed with a mean of 8% pa and a standard deviation of 15 percentage points pa. What is the 99% confidence interval of returns over the next year? Note that the Z-statistic corresponding to a one-tail:

  • 90% normal probability density function is 1.282.
  • 95% normal probability density function is 1.645.
  • 97.5% normal probability density function is 1.960.
  • 99% normal probability density function is 2.326.
  • 99.5% normal probability density function is 2.576

The 99% confidence interval of annual returns is between: