For a price of $1040, Camille will sell you a share which just paid a dividend of $100, and is expected to pay dividends every year forever, growing at a rate of 5% pa.

So the next dividend will be ##100(1+0.05)^1=$105.00##, and the year after it will be ##100(1+0.05)^2=110.25## and so on.

The required return of the stock is 15% pa.

You just signed up for a 30 year **fully amortising** mortgage loan with monthly payments of $1,500 per month. The interest rate is 9% pa which is not expected to change.

How much did you borrow? After 10 years, how much will be owing on the mortgage? The interest rate is still 9% and is not expected to change.

**Question 237** WACC, Miller and Modigliani, interest tax shield

Which of the following discount rates should be the **highest** for a levered company? Ignore the costs of financial distress.

Which one of the following will have no effect on net income (NI) but decrease cash flow from assets (CFFA or FFCF) in this year for a tax-paying firm, all else remaining constant?

Remember:

###NI=(Rev-COGS-FC-Depr-IntExp).(1-t_c )### ###CFFA=NI+Depr-CapEx - ΔNWC+IntExp###**Question 443** corporate financial decision theory, investment decision, financing decision, working capital decision, payout policy

Business people make lots of important decisions. Which of the following is the **most** important long term decision?

The below graph shows a project's net present value (NPV) against its annual discount rate.

Which of the following statements is **NOT** correct?

**Question 558** portfolio weights, portfolio return, short selling

An investor wants to make a portfolio of two stocks A and B with a target expected portfolio return of **16**% pa.

- Stock A has an expected return of
**8**% pa. - Stock B has an expected return of
**12**% pa.

What portfolio weights should the investor have in stocks A and B respectively?

**Question 576** inflation, real and nominal returns and cash flows

What is the present value of a **nominal** payment of $1,000 in 4 years? The **nominal** discount rate is 8% pa and the inflation rate is 2% pa.

On **1 February** 2016 you were told that your refinery company will need to purchase oil on **1 July** 2016. You were afraid of the oil price rising between now and then so you bought some **August** 2016 futures contracts on 1 February 2016 to hedge against changes in the oil price. On 1 February 2016 the oil price was $**40** and the August 2016 futures price was $**43**.

It's now **1 July** 2016 and oil price is $**45** and the August 2016 futures price is $**46**. You bought the spot oil and closed out your futures position on **1 July** 2016.

What was the effective price paid for the oil, taking into account basis risk? All spot and futures oil prices quoted above and below are per barrel.

**Question 965** foreign exchange reserve, foreign exchange rate, no explanation

Observe the below graph of Chinese foreign exchange reserves held by the central bank, as well as the Chinese currency the Yuan (CNY, also called the Renminbi, RMB) against the US Dollar. Note the inverted y-axis scale on the Yuan exchange rate graph.

Which of the below statements is **NOT** correct?