A firm's weighted average cost of capital before tax (##r_\text{WACC before tax}##) would increase due to:
A retail furniture company buys furniture wholesale and distributes it through its retail stores. The owner believes that she has some good ideas for making stylish new furniture. She is considering a project to buy a factory and employ workers to manufacture the new furniture she's designed. Furniture manufacturing has more systematic risk than furniture retailing.
Her furniture retailing firm's after-tax WACC is 20%. Furniture manufacturing firms have an after-tax WACC of 30%. Both firms are optimally geared. Assume a classical tax system.
Which method(s) will give the correct valuation of the new furniture-making project? Select the most correct answer.
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.
The Chinese government attempts to fix its exchange rate against the US dollar and at the same time use monetary policy to fix its interest rate at a set level.
To be able to fix its exchange rate and interest rate in this way, what does the Chinese government actually do?
- Adopts capital controls to prevent financial arbitrage by private firms and individuals.
- Adopts the same interest rate (monetary policy) as the United States.
- Fixes inflation so that the domestic real interest rate is equal to the United States' real interest rate.
Which of the above statements is or are true?
Question 579 price gains and returns over time, time calculation, effective rate
How many years will it take for an asset's price to double if the price grows by 10% pa?
If trader A has sold the right that allows counterparty B to buy the underlying asset from him at maturity if counterparty B wants then trader A is:
A stock's required total return will increase when its:
Question 722 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate
Here is a table of stock prices and returns. Which of the statements below the table is NOT correct?
Price and Return Population Statistics | ||||
Time | Prices | LGDR | GDR | NDR |
0 | 100 | |||
1 | 50 | -0.6931 | 0.5 | -0.5 |
2 | 100 | 0.6931 | 2 | 1 |
Arithmetic average | 0 | 1.25 | 0.25 | |
Arithmetic standard deviation | 0.9802 | 1.0607 | 1.0607 | |
Question 860 idiom, hedging, speculation, arbitrage, market making, insider trading, no explanation
Which class of derivatives market trader is NOT principally focused on ‘buying low and selling high’?