Treasury bonds currently have a return of 5% pa. A stock has a beta of 0.5 and the market return is 10% pa. What is the expected return of the stock?
Below are 4 option graphs. Note that the y-axis is payoff at maturity (T). What options do they depict? List them in the order that they are numbered
Diversification in a portfolio of two assets works best when the correlation between their returns is:
Question 321 foreign exchange rate, monetary policy, American and European terms
The market expects the Reserve Bank of Australia (RBA) to increase the policy rate by 25 basis points at their next meeting.
Then unexpectedly, the RBA announce that they will increase the policy rate by 50 basis points due to high future GDP and inflation forecasts.
What do you expect to happen to Australia's exchange rate in the short term? The Australian dollar will:
Which firms tend to have low forward-looking price-earnings (PE) ratios?
Only consider firms with positive earnings, disregard firms with negative earnings and therefore negative PE ratios.
Question 434 Merton model of corporate debt, real option, option
A risky firm will last for one period only (t=0 to 1), then it will be liquidated. So it's assets will be sold and the debt holders and equity holders will be paid out in that order. The firm has the following quantities:
##V## = Market value of assets.
##E## = Market value of (levered) equity.
##D## = Market value of zero coupon bonds.
##F_1## = Total face value of zero coupon bonds which is promised to be paid in one year.
What is the payoff to debt holders at maturity, assuming that they keep their debt until maturity?
The below graph shows a project's net present value (NPV) against its annual discount rate.
For what discount rate or range of discount rates would you accept and commence the project?
All answer choices are given as approximations from reading off the graph.
You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?