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Question 76  CAPM, SML

Government bonds currently have a return of 5%. A stock has a beta of 2 and the market return is 7%. What is the expected return of the stock?

Question 226  CFFA

Find World Bar's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.

World Bar
Income Statement for
year ending 30th June 2013
Sales 300
COGS 150
Operating expense 50
Depreciation 40
Interest expense 10
Taxable income 50
Tax at 30% 15
Net income 35
World Bar
Balance Sheet
as at 30th June 2013 2012
  $m $m
Current assets 200 230
    Cost 400 400
    Accumul. depr. 75 35
    Carrying amount 325 365
Total assets 525 595
Current liabilities 150 205
Non-current liabilities 235 250
Owners' equity
Retained earnings 100 100
Contributed equity 40 40
Total L and OE 525 595


Note: all figures above and below are given in millions of dollars ($m).

Question 287  bond pricing

A 30 year Japanese government bond was just issued at par with a yield of 1.7% pa. The fixed coupon payments are semi-annual. The bond has a face value of $100.

Six months later, just after the first coupon is paid, the yield of the bond increases to 2% pa. What is the bond's new price?

Question 334  option

Which option position has the possibility of unlimited potential losses?

Question 402  PE ratio, no explanation

Which of the following companies is most suitable for valuation using PE multiples techniques?

Question 539  debt terminology, fully amortising loan, bond pricing

A 'fully amortising' loan can also be called a:

Question 571  foreign exchange rate

An Indonesian lady wishes to convert 1 million Indonesian rupiah (IDR) to Australian dollars (AUD). Exchange rates are 13,125 IDR per USD and 0.79 USD per AUD. How many AUD is the IDR 1 million worth?

Question 778  CML, systematic and idiosyncratic risk, portfolio risk, CAPM, no explanation

The capital market line (CML) is shown in the graph below. The total standard deviation is denoted by σ and the expected return is μ. Assume that markets are efficient so all assets are fairly priced.

Image of CML graph

Which of the below statements is NOT correct?

Question 855  cash cycle, accounting ratio

The below diagram shows a firm’s cash cycle.


Which of the following statements about companies’ cash cycle is NOT correct?

Question 884  monetary policy, impossible trinity, foreign exchange rate, no explanation

According to the impossible trinity, a currency can only have two of these three desirable traits: be fixed against the USD; convertible to and from USD for traders and investors so there are open goods, services and capital markets; and allow independent monetary policy set by the country’s central bank, independent of the US central bank.

Which of the following exchange rate regimes sacrifices fixing the exchange rate to the USD? In other words, which regime uses a floating exchange rate?

Copyright © 2014 Keith Woodward