Government bonds currently have a return of 5% pa. A stock has an expected return of 6% pa and the market return is 7% pa. What is the beta of the stock?
Portfolio Details | ||||||
Stock | Expected return |
Standard deviation |
Correlation ##(\rho_{A,B})## | Dollars invested |
||
A | 0.1 | 0.4 | 0.5 | 60 | ||
B | 0.2 | 0.6 | 140 | |||
What is the standard deviation (not variance) of returns of the above portfolio?
You operate a cattle farm that supplies hamburger meat to the big fast food chains. You buy a lot of grain to feed your cattle, and you sell the fully grown cattle on the livestock market.
You're afraid of adverse movements in grain and livestock prices. What options should you buy to hedge your exposures in the grain and cattle livestock markets?
Select the most correct response:
Bonds X and Y are issued by the same US company. Both bonds yield 6% pa, and they have the same face value ($100), maturity, seniority, and payment frequency.
The only difference is that bond X pays coupons of 8% pa and bond Y pays coupons of 12% pa. Which of the following statements is true?
Which firms tend to have low forward-looking price-earnings (PE) ratios?
Only consider firms with positive earnings, disregard firms with negative earnings and therefore negative PE ratios.
Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?
Question 749 Multiples valuation, PE ratio, price to revenue ratio, price to book ratio, NPV
A real estate agent says that the price of a house in Sydney Australia is approximately equal to the gross weekly rent times 1000.
What type of valuation method is the real estate agent using?
Question 786 fixed for floating interest rate swap, intermediated swap
The below table summarises the borrowing costs confronting two companies A and B.
Bond Market Yields | ||||
Fixed Yield to Maturity (%pa) | Floating Yield (%pa) | |||
Firm A | 3 | L - 0.4 | ||
Firm B | 5 | L + 1 | ||
Firm A wishes to borrow at a floating rate and Firm B wishes to borrow at a fixed rate. Design an intermediated swap (which means there will actually be two swaps) that nets a bank 0.1% and shares the remaining swap benefits between Firms A and B equally. Which of the following statements about the swap is NOT correct?
Question 856 credit terms, no explanation
Your supplier’s credit terms are "1/10 net 30". Which of the following statements about these credit terms is NOT correct?
If you intend to buy an item from your supplier for a tag price of $100 and you: