# Fight Finance

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Stock A and B's returns have a correlation of 0.3. Which statement is NOT correct?

You want to buy an apartment worth $300,000. You have saved a deposit of$60,000.

The bank has agreed to lend you $240,000 as an interest only mortgage loan with a term of 30 years. The interest rate is 6% pa and is not expected to change. What will be your monthly payments? Which one of the following bonds is trading at a discount? A stock is expected to pay a dividend of$15 in one year (t=1), then $25 for 9 years after that (payments at t=2 ,3,...10), and on the 11th year (t=11) the dividend will be 2% less than at t=10, and will continue to shrink at the same rate every year after that forever. The required return of the stock is 10%. All rates are effective annual rates. What is the price of the stock now? Two call options are exactly the same, but one matures in one year and the other matures in two years. Which option would you expect to have the higher price, the option which matures or , or should they have the price? An equity index is currently at 5,000 points. The 2 year futures price is 5,400 points and the total required return is 8% pa with continuous compounding. Each index point is worth$25.

What is the implied continuous dividend yield as a continuously compounded rate per annum?

To value a business's assets, the free cash flow of the firm (FCFF, also called CFFA) needs to be calculated. This requires figures from the firm's income statement and balance sheet. For what figures is the balance sheet needed? Note that the balance sheet is sometimes also called the statement of financial position.

Which of the following interest rate labels does NOT make sense?

Which of the following quantities is commonly assumed to be normally distributed?

A one year European-style put option has a strike price of $4. The option's underlying stock pays no dividends and currently trades at$5. The risk-free interest rate is 10% pa continuously compounded. Use a single step binomial tree to calculate the option price, assuming that the price could rise to $8 $(u = 1.6)$ or fall to$3.125 $(d = 1/1.6)$ in one year. The put option price now is: