Fight Finance

(a) The debt-to-assets (D/V) ratio will increase.

(b) The debt-to-equity ratio (D/E) will increase.

(c) Firm value is likely to have increased due to the higher amount of interest tax shields, assuming that there will not be any costs of financial distress.

(d) The company's after-tax WACC is likely to have decreased.

(e) The company's before-tax WACC is likely to have decreased.

(a) $127.50

(b) $171.14

(c) $173.33

(d) $174.56

(e) $354.06

(a) A sunk cost.

(b) An opportunity cost.

(c) A negative side effect.

(d) A positive side effect.

(e) A depreciation expense.

(a) ##V_0=\dfrac{\dfrac{100}{r} \left( 1- \dfrac{1}{(1+r)^{20}} \right) }{(1+r)^1} ##

(b) ##V_0=\dfrac{100}{r} \left( 1- \dfrac{1}{(1+r)^{20}} \right) (1+r)^1##

(c) ##V_0=\dfrac{100}{r} \left( 1- \dfrac{1}{(1+r)^{19}} \right) +100##

(d) ##V_0=\dfrac{100(1+r)^1}{r} \left( 1- \dfrac{1}{(1+r)^{20}} \right) ##

(e) ##V_0=100 \left( 1-(1+r)^{-19} \right) r^{-1}+100##

(a) Buy debt.

(b) Own debt.

(c) Are owed money.

(d) Write debt.

(e) Have debt assets.

(a) Competition.

(b) Opportunity costs.

(c) Separation of the investment and financing decisions.

(d) Diversification.

(e) Sunk costs.

(a) The option’s expected future continuously compounded returns are always more than or equal to the underlying stock’s expected future continuously compounded returns.

(b) The option’s standard deviation of dollar price changes is always less than or equal to the underlying stock’s standard deviation of dollar price changes.

(c) The option’s standard deviation of continuously compounded returns are always less than or equal to the underlying stock’s standard deviation of continuously compounded returns.

(d) As time elapses and the maturity date of an option approaches, its price will fall, all other things remaining equal.

(e) If the underlying stock’s price rises by $0.01, the call option’s price will rise by less than $0.01 and the put option’s price will fall by less than $0.01.

If a put option is in-the-money, then the spot price (##S_0##) is than, than or to the put option's strike price (##K_T##)?

(a) The currency quote AUD/GBP is called a ‘cross rate’.

(b) The AUD appreciated against the GBP over the period from 1955 to 2018.

(c) The AUD depreciated against the USD over the period from 1955 to 2018.

(d) The y-axis on the ‘AUD/USD’ chart would be measured in AUD per one USD.

(a) If the RBA tried to make the AUD appreciate, it would buy AUD and this would reduce its FX reserves.

(b) The Australian central bank’s FX reserves as a proportion of daily AUD per USD turnover is around 0.3.

(c) The Chinese central bank’s FX reserves as a proportion of daily RMB per USD turnover is around 15.

(d) The Australian central bank’s FX reserves may include AUD.

(e) The Chinese central bank’s FX reserves may include AUD.