Fight Finance

(a) ##IntExp.t_c##

(b) ##IntExp/t_c##

(c) ##IntExp.(1-t_c)##

(d) ##IntExp/(1-t_c)##

(e) ##IntExp.(t_c-1)##

(a) 0.9711

(b) 1.1750

(c) 1.3063

(d) 1.5537

(e) 1.8800

(a) Point A.

(b) Point B.

(c) Point C.

(d) Any of the points.

(e) None of the points.

(a) Selling the company's assets.

(b) Buying a call option on the company's assets.

(c) Buying a put option on the company's assets.

(d) Selling a call option on the company's assets.

(e) Selling a put option on the company's assets.

(a) Obligation to buy the underlying oil at $44 per barrel.

(b) Right to buy the underlying oil at $44 per barrel if she wants.

(c) Right to sell the underlying oil at $44 per barrel if she wants.

(d) Obligation to buy the underlying oil at $44 per barrel if the counterparty chooses to sell it.

(e) Obligation to sell the underlying oil at $44 per barrel if the counterparty chooses to buy it.

(a) The geometric average of the gross discrete returns (GAGDR) equals 1.04075 which is 104.075%.

(b) ##\exp \left( \text{GAGDR} \right) = \text{AALGDR}##. The natural exponent of the GAGDR equals the arithmetic average of the logarithms of the gross discrete returns (AALGDR).

(c) ##\text{GAGDR}^T = \left( P_T/P_0 \right)##. The GAGDR raised to the power of the number of time period that it's measured over equals the ratio of the first and last prices.

(d) ##\text{GAGDR} = \exp \left( \text{AALGDR} \right)##. This is always true, regardless of the distribution of the prices or returns. The logarithm of the geometric average of the gross discrete returns (LGAGDR) is always equal to the arithmetic average of the logarithm of the gross discrete returns (AALGDR).

(e) ##\text{AAGDR} \approx \exp \left( \text{AALGDR} + \text{SDLGDR}^2/2 \right)##. This is only approximately true and depends on the distribution of the prices and returns. It's asymptotically true as the time period that the returns are measured over reaches infinity.

(a) Expected total return will equal its required total return if the stock is fairly priced.

(b) Expected total return will be less than its required total return if the stock is over-priced.

(c) Required total return should be higher than the risk free government bond yield if the stock has a positive beta.

(d) Required total return depends on its total variance, required capital return depends on systematic variance and the dividend yield depends on idiosyncratic variance.

(e) Expected capital return equals the expected total return less whatever the management decide that they will pay as an income return (which is the dividend yield).

(a) The NPV is negative $1m.

(b) The IRR is 0% pa, less than the 10% cost of capital.

(c) The payback period is one year.

(d) The project should be rejected.

(e) If the project is accepted now then the market value of the firm's assets will fall by $11m.

(a) Lev’s annual interest expense would have been $40,000.

(b) Lev’s annual loss before tax on the investment property was $10,000

(c) Lev’s annual loss after tax on the investment property was $5,500

(d) Lev’s personal tax saving due to the investment property was $5,500.

(e) Nolev’s personal tax payable due to the investment property was $13,500.

(a) Announcement date

(b) Last cum-dividend date

(c) Ex-dividend date

(d) Record date

(e) Payment date