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In Australia, domestic university students are allowed to buy concession tickets for the bus, train and ferry which sell at a discount of 50% to full-price tickets.

The Australian Government do not allow international university students to buy concession tickets, they have to pay the full price.

Some international students see this as unfair and they are willing to pay for fake university identification cards which have the concession sticker.

What is the most that an international student would be willing to pay for a fake identification card?

Assume that international students:

consider buying their fake card on the morning of the first day of university from their neighbour, just before they leave to take the train into university.
buy their weekly train tickets on the morning of the first day of each week.
ride the train to university and back home again every day seven days per week until summer holidays 40 weeks from now. The concession card only lasts for those 40 weeks. Assume that there are 52 weeks in the year for the purpose of interest rate conversion.
a single full-priced one-way train ride costs $5.
have a discount rate of 11% pa, given as an effective annual rate.

Approach this question from a purely financial view point, ignoring the illegality, embarrassment and the morality of committing fraud.

Question 330 APR, effective rate, debt terminology

Which of the following statements about effective rates and annualised percentage rates (APR's) is NOT correct?

(a) Effective rates compound once over their time period. So an effective monthly rate compounds once per month.

(b) APR's compound more than once per year. So an APR compounding monthly compounds 12 times per year. The exception is an APR that compounds annually (once per year) which is the same thing as an effective annual rate.

(c) To convert an effective rate to an APR, multiply the effective rate by the number of time periods in one year. So an effective monthly rate multiplied by 12 is equal to an APR compounding monthly.

(d) To convert an APR compounding monthly to an effective monthly rate, divide the APR by the number of months in one year (12).

(e) To convert an APR compounding monthly to an effective weekly rate, divide the APR by the number of weeks in one year (approximately 52).

Question 381 Merton model of corporate debt, option, real option

In the Merton model of corporate debt, buying a levered company's debt is equivalent to buying risk free government bonds and:

Question 534 NPV, no explanation

You have $100,000 in the bank. The bank pays interest at 10% pa, given as an effective annual rate.

You wish to consume half as much now (t=0) as in one year (t=1) and have nothing left in the bank at the end.

How much can you consume at time zero and one? The answer choices are given in the same order.

Question 648 margin call, future

A trader buys a one year futures contract on crude oil. The contract is for the delivery of 1,000 barrels. The current futures price is $38.94 per barrel. The initial margin is $3,410 per contract, and the maintenance margin is $3,100 per contract.

What is the smallest price change that would lead to a margin call for the buyer?

Question 649 margin call, future

A trader sells a one year futures contract on crude oil. The contract is for the delivery of 1,000 barrels. The current futures price is $38.94 per barrel. The initial margin is $3,410 per contract, and the maintenance margin is $3,100 per contract.

What is the smallest price change that would lead to a margin call for the seller?

Question 713 effective rate conversion

An effective semi-annual return of 5% ##(r_\text{eff 6mth})## is equivalent to an effective annual return ##(r_\text{eff annual})## of:

Question 745 real and nominal returns and cash flows, inflation, income and capital returns

If the nominal gold price is expected to increase at the same rate as inflation which is 3% pa, which of the following statements is NOT correct?

Question 805 short selling

Short selling is a way to make money from falling prices. In what order must the following steps be completed to short-sell an asset? Let Tom, Dick and Harry be traders in the share market.

Step P: Purchase the asset from Harry.
Step G: Give the asset to Tom.
Step W: Wait and hope that the asset price falls.
Step B: Borrow the asset from Tom.
Step S: Sell the asset to Dick.

Select the statement with the correct order of steps.

Question 902 Basel accord

Below is a table of the 'Risk-weights for residential mortgages' as shown in APRA Basel 3 Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk January 2013.

LVR (%)	Standard eligible mortgages		Non-standard eligible mortgages
	Risk-weight (no mortgage insurance) %	Risk-weight (with at least 40% of the mortgage insured by an acceptable LMI) %	Risk-weight (no mortgage insurance) %	Risk-weight (with at least 40% of the mortgage insured by an acceptable LMI) %
0 – 60	35	35	50	35
60.01 – 80	35	35	75	50
80.01 – 90	50	35	100	75
90.01 – 100	75	50	100	75
> 100.01	100	75	100	100

A bank is considering granting a home loan to a man to buy a house worth $1.25 million using his own funds and the loan. The loan would be standard with no lenders mortgage insurance (LMI) and an LVR of 80%.

What is the minimum regulatory capital that the bank requires to grant the home loan under the Basel 3 Accord? Ignore the capital conservation buffer.