FINM710016: Money Markets and FinanceFoundations of Finance
Tutorial 5 Solutions
Question One
Two investment projects have been identified and the net cash flows for each appear
below. The required rate of return is 10% p.a. for each. Calculate the NPV fo
FINM7006: Foundations of Finance
Tutorial 2 Solutions
Question One
Calculate the future value of $500 invested today for a period of 4 years at an interest
rate of 10% p.a. compounded annually. Show how and discuss why your answer
would change if interest
FINM 7006: Foundations of Finance
Making Investment Decisions: Solutions to Practice Questions
Question One
A corporation is considering installing a machine that costs $100,000 plus
installation costs of $10,000. It will generate cash revenues of $200,00
FINM7006: Foundations of Finance
Tutorial 3 Questions
Question One
Describe the characteristics of a corporation that differentiate it from other forms of
business organization such as partnerships and sole proprietorships?
Question Two
What is meant if a
FINM7006: Foundations of Finance
Tutorial 5 Questions
Question One
Two investment projects have been identified and the net cash flows for each appear
below. The required rate of return is 10% p.a. for each. Calculate the NPV for each
project and advise w
FINM7006: Foundations of Finance
Tutorial 4 Solutions
Question One
Describe the difference between a coupon-paying bond and a discount security.
A coupon-paying bond is a medium-to-long term fixed interest security that pays a
regular coupon (interest pay
FINM7006: Foundations of Finance
Tutorial 4 Questions
Question One
Describe the difference between a coupon-paying bond and a discount security.
Question Two
Calculate the price of a 90-day bank accepted bill quoted as having a yield of 10%
p.a.
Question
FINM7006: Foundations of Finance
Tutorial 5 Solutions
Question One
Two investment projects have been identified and the net cash flows for each appear
below. The required rate of return is 10% p.a. for each. Calculate the NPV for each
project and advise w
FINM7006: Foundations of Finance
Tutorial 6 Questions
Question One
What is a probability and how can we relate it to share returns?
Question Two
Define the terms expected value and standard deviation. In providing your answer,
show how these terms relate
FINM7006: Foundations of Finance
Tutorial 6 Solutions
Question One
What is a probability and how can we relate it to share returns?
Probabilities refer to the likelihood of an event happening. We can relate this concept
to share returns by considering the
FINM7006: Foundations of Finance
Tutorial 7 Questions
Question One
Comment on the accuracy of the following statement: Two assets that have the same
expected return and same variance cannot provide diversification benefits if combined
in a two-asset portf
FINM7006: Foundations of Finance
Tutorial 7 Solutions
Question One
Comment on the accuracy of the following statement: Two assets that have the same
expected return and same variance cannot provide diversification benefits if
combined in a two-asset portf
FINM7006: Foundations of Finance
Tutorial 8 Questions
Question One
What is beta?
Question Two
You invest in two stocks. Stock A has a beta of 1.5 and stock B has a beta of 1.2. If you
invest 50% in each stock, what is the beta of your portfolio?
Question
FINM7006: Foundations of Finance
Tutorial 8 Solutions
Question One
What is beta?
Beta provides a measure of the extent to which a security moves with the market
portfolio. Beta therefore provides a measure of a stocks volatility relative to the
market. Fo
FINM7006: Foundations of Finance
Tutorial 9 Questions
Question One
Discuss the differences between forward contracts and futures contracts.
Question Two
What is marking to market?
Question Three
Draw the profit diagrams for both a long and short position
FINM7006: Foundations of Finance
Tutorial 10 Questions
Question One
The spot price of wheat is 600 cents per bushel, the riskless rate of interest is 6% p.a.,
and the cost of storing wheat is 5% p.a. What is the value of a wheat futures contract
with 6 mo
FINM7006: Foundations of Finance
Tutorial 11 Questions
Question One
Draw the payoff and overall profit diagrams for both a long and short position in a
European call option given a strike price on the option of $10 and a premium of $1.10
paid at the time
FINM7006: Foundations of Finance
Tutorial 9 Solutions
Question One
Discuss the differences between forward contracts and futures contracts.
The main differences between forward and futures contracts are:
Standardization: Forward contracts are over the cou
FINM7006: Foundations of Finance
Tutorial 2 Solutions
Question One
Calculate the future value of $500 invested today for a period of 4 years at an interest
rate of 10% p.a. compounded annually. Show how and discuss why your answer
would change if interest
FINM 7006: Foundations of Finance
Tutorial 1 Questions
Question One
What are the primary roles of financial markets?
Question Two
Describe the flow of funds within the financial system.
Question Three
What is the difference between a primary market and a
FINM 7006: Foundations of Finance
Risk and Return: Practice Questions
Question One
You have recently hired a new analyst named Margaret at the investment bank you
have started. Yesterday, you asked Margaret to provide estimates of the expected
return and
FINM 7006: Foundations of Finance
Risk and Return: Solutions to Practice Questions
Question One
You have recently hired a new analyst named Margaret at the investment bank you
have started. Yesterday, you asked Margaret to provide estimates of the expecte
FINM 7006: Foundations of Finance
Portfolio Theory: Practice Questions
Question One
Your portfolio currently consists of only one stock that has an expected return of 9
percent and a standard deviation of twenty five per cent. A friend has advised you tha
FINM7006: Foundations of Finance
CAPM: Practice Questions
Question One
Calculate the required rate of return for a risky asset with a of 1.75 given an
expected return on the market of 14% and a risk free rate of 7%.
Question Two
Calculate the required rat
FINM7006: Foundations of Finance
CAPM: Solutions to Practice Questions
Question One
Calculate the required rate of return for a risky asset with a of 1.75 given an
expected return on the market of 14% and a risk free rate of 7%.
The required rate of retur
FINM7006: Foundations of Finance
Forwards and Futures Contracts (Set 1): Practice Questions
Question One
You sold one SPI futures contract on July 24, when the price was 2,480. Settlement
(closing) prices over the subsequent days are:
Date
Index Level
Jul
FINM 7006: Foundations of Finance
Portfolio Theory: Solutions to Practice Questions
Question One
Your portfolio currently consists of only one stock that has an expected return of 9
percent and a standard deviation of twenty five per cent. A friend has ad
FINM7006: Foundations of Finance
Forwards and Futures Contracts (Set 1):
Solutions to Practice Questions
Question One
You sold one SPI futures contract on July 24, when the price was 2,480. Settlement
(closing) prices over the subsequent days are:
Date
In
FINM 7006: Foundations of Finance
Options: Practice Questions
Question One
MIM stock is currently trading at $1.76 per share. European put and call options
struck at $1.65 and maturing three months from today are trading at $0.05 and $0.17
respectively. T
FINM 7006: Foundations of Finance
Options: Solutions to Practice Questions
Question One
MIM stock is currently trading at $1.76 per share. European put and call options
struck at $1.65 and maturing three months from today are trading at $0.05 and $0.17
re
Prepared by Chen Tang
The Australian National University
FINM 1001 Foundations of Finance
Week 1 Summary Sheet
Three Players interacted in the financial markets: Lenders, Borrowers, Financial
LO 1.
Markets
Financial Markets
Dfn
Three roles
Lenders
Df
Prepared by Chen Tang
The Australian National University
FINM 1001 Foundations of Finance
Week 2 Summary Sheet
Time Value of Money (TVM) $1 today is better than $1 in the future
Future Value
Single Cash Flow
Simple interest ( interest doesnt earn any in
FINM1001 Foundations of Finance
Financial Mathematics: Solutions to Extra Practice Questions
Note: In attempting these questions, particularly the more complex ones, it may prove
useful to draw a time-line to determine the magnitude and timing of cash flo