Fight Finance

(a) Idiosyncratic risk.

(b) Systematic risk.

(c) Both idiosyncratic and systematic risk.

(d) Market risk.

(e) Beta risk.

(a) The dividend yield is equal to ##(r-g)##.

(b) The dividend yield is equal to ##\left( \dfrac{d_1}{p_0} \right)##.

(c) The total return of the stock is equal to ##(r)##.

(d) The total return of the stock is equal to ##\left( \dfrac{d_1+p_0.g}{p_0} \right)##.

(e) The total return of the stock is equal to ##(r+g)##.

(a) ##V_0 = \dfrac{C_1}{r} \left(1-\dfrac{1}{(1+r)^T} \right) ##

(b) ##V_0 = \dfrac{C_1 \left(1-\dfrac{1}{(1+r)^T} \right)}{r}##

(c) ##V_0 = C_1\dfrac{\left(1-(1+r)^{-T} \right)}{r}##

(d) ##V_0 = C_1 \left(1-(1+r)^{-T} \right) r^{-1}##

(e) ##V_0 = C_1 \left(r^{-1}-(1+r)^{-T-1} \right)##

(a) ##\min(S_T - K, 0)##.

(b) ##-\min(S_T - K, 0)##.

(c) ##\max(K-S_T, 0)##.

(d) ##-\max(K-S_T, 0)##.

(e)##-\max(S_T-K, 0)##.

(a) A firm's quick ratio will always be equal to or less than its current ratio.

(b) A firm will have positive net working capital if it has a current ratio that's greater than one.

(c) A firm's gross margin will be greater than or equal to its operating margin, which will be greater than or equal to its net profit margin.

(d) A firm's fixed asset turnover will be less than or equal to asset turnover.

(e) A firm's debt to equity ratio will always be greater than or equal to its debt to assets ratio.

(a) $21,600,     $95,035.46

(b) $21,600,     $49,515.44

(c) $21,600,     $4,909.33

(d) $21,600,     $2,557.86

(e) $11,254.05,     $2,557.86

You own a debt asset. Are you a or a ?

(a) Capital gains tax.

(b) Explicit transaction costs such as brokerage fees.

(c) Implicit transaction costs such as bid-ask spreads.

(d) Portfolio rebalancing.

(e) Time wasted on researching whether it's better to buy or sell.

(a) Prices, ##P_1##.

(b) Gross discrete returns per annum, ##r_{\text{gdr 0 }\rightarrow \text{ 1}} = \dfrac{P_1}{P_0} ##.

(c) Effective annual returns per annum also known as net discrete returns, ##r_{\text{eff 0 }\rightarrow \text{ 1}} = \dfrac{P_1 - P_0}{P_0} = \dfrac{P_1}{P_0}-1##.

(d) Continuously compounded returns per annum, ##r_{\text{cc 0 }\rightarrow \text{ 1}} = \ln \left( \dfrac{P_1}{P_0} \right)##.

(e) Annualised percentage rates compounding per month, ##r_{\text{apr comp monthly 0 }\rightarrow \text{ 1 mth}} = \left( \dfrac{P_1 - P_0}{P_0} \right) \times 12##.

(a) The call option price is expected to be $654.757851.

(b) The stock investment value used for hedging should be $5506.488143, partly funded by $4845.505265 in debt.

(c) The interest expense on the borrowing from the previous day will be $0.663813.

(d) The gain on the stock is zero and the gain on the short call option is $6.225027.

(e) The net gain is $5.561214.