For a price of $10.20 each, Renee will sell you 100 shares. Each share is expected to pay dividends in perpetuity, growing at a rate of 5% pa. The next dividend is one year away (t=1) and is expected to be $1 per share.
The required return of the stock is 15% pa.
The following table shows a sample of historical total returns of shares in two different companies A and B.
Stock Returns | ||
Total effective annual returns | ||
Year | ##r_A## | ##r_B## |
2007 | 0.2 | 0.4 |
2008 | 0.04 | -0.2 |
2009 | -0.1 | -0.3 |
2010 | 0.18 | 0.5 |
What is the historical sample covariance (##\hat{\sigma}_{A,B}##) and correlation (##\rho_{A,B}##) of stock A and B's total effective annual returns?
Question 382 Merton model of corporate debt, real option, option
In the Merton model of corporate debt, buying a levered company's shares is equivalent to:
Question 624 franking credit, personal tax on dividends, imputation tax system, no explanation
Which of the following statements about Australian franking credits is NOT correct? Franking credits:
Which of the below formulas gives the profit ##(\pi)## from being short a put option? Let the underlying asset price at maturity be ##S_T##, the exercise price be ##X_T## and the option price be ##f_{LP,0}##. Note that ##S_T##, ##X_T## and ##f_{LP,0}## are all positive numbers.
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 821 option, option profit, option payoff at maturity, no explanation
You just paid $4 for a 3 month European style call option on a stock currently priced at $47 with a strike price of $50. The stock’s next dividend will be $1 in 4 months’ time. Note that the dividend is paid after the option matures. Which of the below statements is NOT correct?
Question 880 gold standard, no explanation
Under the Gold Standard (1876 to 1913), currencies were priced relative to:
A stock's returns are normally distributed with a mean of 10% pa and a standard deviation of 20 percentage points pa. What is the 90% confidence interval of returns over the next year? Note that the Z-statistic corresponding to a one-tail:
- 90% normal probability density function is 1.282.
- 95% normal probability density function is 1.645.
- 97.5% normal probability density function is 1.960.
The 90% confidence interval of annual returns is between:
Major City Apartment Prices | |||
One bedroom, one bathroom, around 55 square metre floor space, Dec 2018 | |||
City | Advertised price | Currency | FX quote |
London, Great Britain | 995,500 | GBP | 1.3 USD per GBP |
Paris, France | 639,000 | EUR | 0.88 USD per EUR |
San Francisco, USA | 859,000 | USD | 1 USD per USD |
Shanghai, China | 6,300,000 | RMB | 6.9 RMB per USD |
Sydney, Australia | 670,000 | AUD | 0.72 USD per AUD |
Tokyo, Japan | 50,800,000 | JPY | 112 JPY per USD |
Which city has the most expensive apartment, measured in United States Dollars (USD)? Pay attention to the FX quotes.