The required return of a project is 10%, given as an effective annual rate.
What is the payback period of the project in years?
Assume that the cash flows shown in the table are received smoothly over the year. So the $121 at time 2 is actually earned smoothly from t=1 to t=2.
| Project Cash Flows | |
| Time (yrs) | Cash flow ($) |
| 0 | -100 |
| 1 | 11 |
| 2 | 121 |
Below are 4 option graphs. Note that the y-axis is payoff at maturity (T). What options do they depict? List them in the order that they are numbered.
Estimate the Chinese bank ICBC's share price using a backward-looking price earnings (PE) multiples approach with the following assumptions and figures only. Note that the renminbi (RMB) is the Chinese currency, also known as the yuan (CNY).
- The 4 major Chinese banks ICBC, China Construction Bank (CCB), Bank of China (BOC) and Agricultural Bank of China (ABC) are comparable companies;
- ICBC 's historical earnings per share (EPS) is RMB 0.74;
- CCB's backward-looking PE ratio is 4.59;
- BOC 's backward-looking PE ratio is 4.78;
- ABC's backward-looking PE ratio is also 4.78;
Note: Figures sourced from Google Finance on 25 March 2014. Share prices are from the Shanghai stock exchange.
Which firms tend to have low forward-looking price-earnings (PE) ratios? Only consider firms with positive PE ratios.
Itau Unibanco is a major listed bank in Brazil with a market capitalisation of equity equal to BRL 85.744 billion, EPS of BRL 3.96 and 2.97 billion shares on issue.
Banco Bradesco is another major bank with total earnings of BRL 8.77 billion and 2.52 billion shares on issue.
Estimate Banco Bradesco's current share price using a price-earnings multiples approach assuming that Itau Unibanco is a comparable firm.
Note that BRL is the Brazilian Real, their currency. Figures sourced from Google Finance on the market close of the BVMF on 24 July 2015.
Question 770 expected and historical returns, income and capital returns, coupon rate, bond pricing
Which of the following statements is NOT correct? Assume that all events are a surprise and that all other things remain equal. So for example, don't assume that just because a company's dividends and profit rise that its required return will also rise, assume the required return stays the same.
Question 861 open interest, closing out future contract, no explanation
Alice, Bob, Chris and Delta are traders in the futures market. The following trades occur over a single day in a newly-opened equity index future that matures in one year which the exchange just made available.
1. Alice buys 2 future from Bob.
2. Chris buys 5 futures from Delta.
3. Chris buys 9 futures from Bob.
These were the only trades made in this equity index future.
Which of the following statements is NOT correct?
Question 872 duration, Macaulay duration, modified duration, portfolio duration
A fixed coupon bond’s modified duration is 20 years, and yields are currently 10% pa compounded annually. Which of the following statements about the bond is NOT correct?
Which of the following statements about an asset’s standard deviation of returns is NOT correct? All other things remaining equal, the higher the asset’s standard deviation of returns: