AFF2701 Semester 1, 2011 Practice Questions
Multiple Choice Questions
Question1 How much should you pay for a share of stock that offers a constant growth rate
of 12%, requires a 16% rate of return, and is expected to sell for $60 one year from
now?
A) Be
Week 12: Portfolio performance
evaluation
Cameron Truong
Introduction
Complicated subject
Theoretically correct measures are difficult to construct
Different statistics or measures are appropriate for different
types of investment decisions or portfolios
Week 5: Equity Valuation
Paul Dou
Objectives and learning outcomes from this module
Explain the characteristics of equity securities.
Understand some financial ratios.
Understand how equity securities are valued.
Identify the expected return on equity sec
Week 6: Risk, Return, CAPM and Cost of Capital
Paul Dou
Recall
One way to calculate re is to imply from the observed
share price, using models such as the Gordon Growth
Model (revise week 5 if necessary)
Another way to calculate re is to use Capital Asset
Week 7: Efficient Market
Hypothesis
Cameron Truong
Objectives and learning outcomes
Appreciate the concept of market efficiency.
Identify the three forms of market efficiency.
Appreciate the implications of market efficiency.
Identify the differences betw
Week 8: Anomalies, Violations
of Market Efficiency
Paul Dou
Objectives and learning outcomes from this module
Violation of weak form market efficiency
Calendar effect
Contrarian
Momentum
Violation of semi-strong form market efficiency
Post-Earnings-An
Week 9: Sources of Funds, IPO
Cameron Truong
Objectives and learning outcomes of the module
Appreciate how the life cycle of the firm may impact the
choice of funds.
Understand how firms raise funds for investment projects.
Understand the roles of fina
Week 10: Sources of Funds: Rights
Issue, Private Placement, Bonus Issue
and Dividend Reinvestment
Cameron Truong
Subsequent equity raising (Seasoned)
Once the firms are listed on the stock exchange, the
avenues to raise additional funds widen.
Firms per
Week 11: Payout policy
Paul Dou
Objectives and learning outcomes of the module
Identify why payout policy may be important.
Identify the framework within which payout policy is
decided.
Appreciate the effects of different taxation structures
on payout
2/25/2009
Week 1 and 2
Introduction to Financial
Mathematics
Cameron Truong
Objectives & learning outcomes of week 1
Appreciate the difference between nominal and real
interest rates.
Understand the concepts of present value, future value
and their applic
Equity Markets
$
Underwriter
Initial Investor
Investors
$
Investment
Advisers
Readiness
Deal Flow
$
Institutional
Investors
P
a
p
e
r
$
Paper
Paper
Bond/Share Pricing and
Investment Allocation
A
B
Department of Accounting and Finance
C
Stock
Market
D
P
a
Suggested solutions for Tutorial 1 questions
1.
If the monthly payment is denoted as C, then:
1 (1 0.1 / 12) 48
8000
C
0.1 / 12
C 202.90
where i =0.1/12 per month (i.e. i is monthly rate).
Therefore, the effective annual interest rate on the loan is:
Tutorial 3: suggested solutions for selected questions
1.
a.
The expected cash flows from the firm are in the form of a perpetuity. The
discount rate is:
rf + (rm rf ) = 4% + 0.4 (12% 4%) = 7.2%
Therefore, the value of the firm would be:
P0
b.
Cash flow
Thank you Cameron.
I feel almost at home, having qualified as an engineer here when it was Caulfield
Tech. Forty-something years ago !
That should leave time for some questions, which I look forward to.
Slide 12
So the territory Im going to cover:
W hy ha
Ive spent the last hour or so talking about the main game, the ASX, the
Exchange that deals with the big end of town.
But a healthy capital market is much more than that. Small companies need
capital too and its the small companies that can be the drivers
Thank you Cameron.
I feel almost at home, having qualified as an engineer here when it was Caulfield
Tech. Forty-something years ago !
That should leave time for some questions, which I look forward to.
Slide 12
So the territory Im going to cover:
Why hav
Slide 2
The Australian Securities Exchange
1. W hat is it?
2. W hat does it offer? (what doesnt it do: OTC, currency)
3. W ho uses it and why?
4. How do they use it?
5. How does it work?
6. How is it controlled?
7. How do people use it to make money (Risk
Slide 2
The Australian Securities Exchange
1. What is it?
2. What does it offer? (what doesnt it do: OTC, currency)
3. Who uses it and why?
4. How do they use it?
5. How does it work?
6. How is it controlled?
7. How do people use it to make money (Risk or
IPO Process
Slide: The Matrix
Why List?
Slide: Why List
Companies have lots of reasons for listing their shares on a share
market - and they come from a wide variety of starting points. In a
minute I'll be talking about just one example, one that I've had
Exam II
Name
(3 points)
FINANCE 5023
Fall 2005
Multiple Choice - Circle the letter of the BEST answer (3 points each)
1. Which of the following capital budgeting techniques is conceptually LEAST desirable?
a.
b.
c.
d.
e.
Net Present Value
Payback
Internal