A wholesale building supplies business offers credit to its customers. Customers are given 60 days to pay for their goods, but if they pay within 7 days they will get a 2% discount.
What is the effective interest rate implicit in the discount being offered?
Assume 365 days in a year and that all customers pay on either the 7th day or the 60th day. All rates given below are effective annual rates.
Three years ago Frederika bought a house for $400,000.
Now it's worth $600,000, based on recent similar sales in the area.
Frederika's residential property has an expected total return of 7% pa.
She rents her house out for $2,500 per month, paid in advance. Every 12 months she plans to increase the rental payments.
The present value of 12 months of rental payments is $29,089.48.
The future value of 12 months of rental payments one year ahead is $31,125.74.
What is the expected annual capital yield of the property?
Question 498 NPV, Annuity, perpetuity with growth, multi stage growth model
A business project is expected to cost $100 now (t=0), then pay $10 at the end of the third (t=3), fourth, fifth and sixth years, and then grow by 5% pa every year forever. So the cash flow will be $10.5 at the end of the seventh year (t=7), then $11.025 at the end of the eighth year (t=8) and so on perpetually. The total required return is 10℅ pa.
Which of the following formulas will NOT give the correct net present value of the project?
Question 548 equivalent annual cash flow, time calculation, no explanation
An Apple iPhone 6 smart phone can be bought now for $999. An Android Kogan Agora 4G+ smart phone can be bought now for $240.
If the Kogan phone lasts for one year, approximately how long must the Apple phone last for to have the same equivalent annual cost?
Assume that both phones have equivalent features besides their lifetimes, that both are worthless once they've outlasted their life, the discount rate is 10% pa given as an effective annual rate, and there are no extra costs or benefits from either phone.
Question 574 inflation, real and nominal returns and cash flows, NPV
What is the present value of a nominal payment of $100 in 5 years? The real discount rate is 10% pa and the inflation rate is 3% pa.
The Australian dollar's value was:
Did the Australian dollar or against the US dollar between these dates?
Question 795 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 Delta of a European put option?
Question 891 foreign exchange rate, monetary policy, no explanation
Suppose the market expects the Bank of Japan (BoJ) to decrease their short term interest rate by 15 basis points at their next meeting. The current short term interest rate is -0.1% pa and the exchange rate is 100 JPY per USD.
Then unexpectedly, the BoJ announce that they will leave the short term interest rate unchanged.
What do you expect to happen to Japan’s exchange rate on the day when the surprise announcement is made? The Japanese Yen (JPY) is likely to suddenly: