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Question 87  fully amortising loan, APR

You want to buy an apartment worth $500,000. You have saved a deposit of $50,000. The bank has agreed to lend you the $450,000 as a fully amortising mortgage loan with a term of 25 years. The interest rate is 6% pa and is not expected to change.

What will be your monthly payments?



Question 158  DDM, income and capital returns

The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.

###p_0=\frac{d_1}{r_\text{eff}-g_\text{eff}}###

Which expression is NOT equal to the expected capital return?



Question 164  implicit interest rate in wholesale credit

A wholesale store offers credit to its customers. Customers are given 60 days to pay for their goods, but if they pay immediately they will get a 1.5% discount.

What is the effective interest rate implicit in the discount being offered? Assume 365 days in a year and that all customers pay either immediately or the 60th day. All of the below answer choices are given as effective annual interest rates.



Question 259  fully amortising loan, APR

You want to buy a house priced at $400,000. You have saved a deposit of $40,000. The bank has agreed to lend you $360,000 as a fully amortising loan with a term of 30 years. The interest rate is 8% pa payable monthly and is not expected to change.

What will be your monthly payments?



Question 409  NPV, capital structure, capital budgeting

A pharmaceutical firm has just discovered a valuable new drug. So far the news has been kept a secret.

The net present value of making and commercialising the drug is $200 million, but $600 million of bonds will need to be issued to fund the project and buy the necessary plant and equipment.

The firm will release the news of the discovery and bond raising to shareholders simultaneously in the same announcement. The bonds will be issued shortly after.

Once the announcement is made and the bonds are issued, what is the expected increase in the value of the firm's assets (ΔV), market capitalisation of debt (ΔD) and market cap of equity (ΔE)?

The triangle symbol is the Greek letter capital delta which means change or increase in mathematics.

Ignore the benefit of interest tax shields from having more debt.

Remember: ##ΔV = ΔD+ΔE##



Question 736  debt terminology

You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?



Question 740  real and nominal returns and cash flows, DDM, inflation

Taking inflation into account when using the DDM can be hard. Which of the following formulas will NOT give a company's current stock price ##(P_0)##? Assume that the annual dividend was just paid ##(C_0)##, and the next dividend will be paid in one year ##(C_1)##.



Question 772  interest tax shield, capital structure, leverage

A firm issues debt and uses the funds to buy back equity. Assume that there are no costs of financial distress or transactions costs. Which of the following statements about interest tax shields is NOT correct?



Question 783  open interest, trade volume, future

Alice, Bob, Chris and Delta are traders in the futures market. The following trades occur over a single day in a newly-opened equity index future that matures in one year which the exchange just made available.

1. Alice buys 2 futures from Bob.

2. Chris buys 3 futures from Delta.

3. Delta buys 5 futures from Alice.

Which of the following statements is NOT correct?



Question 810  CAPM, systematic and idiosyncratic risk, market efficiency

Examine the graphs below. Assume that asset A is a single stock. Which of the following statements is NOT correct? Asset A:

Image of CML graph




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