Professional Documents
Culture Documents
1.If a company offers a 3-for-6 bonus issue and the current share price cum-bonus is $8.73,
the theoretical value of each share ex-bonus is $__________________ (two decimal places)
2.The current market price of a stock is $3.24. The rights issue is one-for-ten, priced at
$2.83. The theoretical ex-rights price is $ ______________ (two decimal places) (sai) 3.2
3.An investor holds 400 shares of a company that is about to make a bonus issue of five
shares for every two held. If the shares are currently trading for $2.85, the value of the
holding after the bonus issue will be $_____________ (two decimal places)
1.53
=
6.7 %
= 22.84
6.Company shares are priced at $14.49. The company announces a share split of 3 for 1.
The new share price should be $______________ (two decimal places)
3 for 1 split:
7.The price of a share if it paid $1.4 in dividends in the last financial year, its dividend
growth rate is 3.4 per cent, and the required rate of return is 10.2 per cent should be
$___________ (two decimal places)
1+3.4 %
= 1.4 x
10.2%−3.4 %
= 21.29
8.A company recently announced renounceable offers that give eligible shareholders the
right to purchase the shares of the company at an issue price of $9 per share for every 4
shares they hold. If the cum-right shares are priced at $11, the value of right is
$____________ (two decimal places) 1.6
4 x (11-9)/5 = 1.6
4 for 1split
3.7/4 = 0.93
10.BH Mining declared a 100 per cent partly franked dividend of $0.60 per share. The
company pays a corporate tax rate of 30 per cent. If a shareholder holds 100 shares of BH
Mining and the shareholder’s marginal tax rate is 37 per cent, the tax payable by the
shareholder is $__________ 6
MODULE 6
SIMPLE INTEREST
1.A bank bill with a face value of $500,000 and 90 days to maturity is purchased with a
yield to maturity of 7.44% per annum. After the bill has been held for 28 days, it is sold at
a yield of 6.78% per annum. The holding period yield for the holder of the note is ________
% (two decimal places)
500000
=
[ (
1+
90
365
x 7.44 % )]
= 490992.64
500000
=
[ (
1+
62
365
x 6.78 % )]
= 494307.21
The investor bought low at 490992.64 and sell high at 494307.21 => profit = 3314.57
365 I
i= ×
d A
365 3314.57
Holding Period Yield=HPY= x
28 490992.64
= 8.8%
2.If you invest $1800 for two years at 6.1% per annum simple interest, the value of your
investment at the end of the two years will be $__________ (two decimal places)
S= A [1+ ( n × i ) ]
S
A=
[ 1+ ( n ×i ) ]
12619
¿
[1+( 2 ×7.59 % ) ]
= 10955.90
4.If you invest $14100 for 18 months at 7% per annum simple interest, the
value of your investment at the end of the 18 months will be
$________________ (two decimal places)
S= A [1+ ( n × i ) ]
d
I= A× ×i
365
= 1259 x 1 x 7% = 88.13$
6. If a company sells (discounts) a bank bill with a face value of $500 000, a term to
maturity of 120 days, and a yield of 7.67% per annum, the company will raise
$_______________ on the issue? (Ignore transaction fees, two decimal places)
500000
=
[ (
1+
120
365
x 7.67 % )] = 487701.90
7. If you borrow $100,000 for 90 days with simple interest of 8.3% per annum,
the total amount of interest paid on the loan is $ _____________ (two decimal
places)
d
I= A× ×i
365
8. If your deposit of $30,000 becomes $30,360 at the end of 120 days, the
annual yield earned is _________% (two decimal places)
365 I
i= ×
d A
= 365/120 x 360/30000 = 3.65% I=360
9. If you receive $100 000 back as principal and interest at the end of the year for
an initial investment of $93,483 at the start of the year, the interest rate that has
been earned on your investment is ________% (two decimal places)
365 I
i= ×
d A
10. If a company sells (discounts) a bank bill with a face value of $100 000, a
term to maturity of 90 days, and a yield of 7.25% per annum, the company will
raise $__________________ on the issue? (Ignore transaction fees, two decimal
places)
S
A=
[ 1+ ( n ×i ) ]
100000
¿
¿¿
= 98243.73
COMPOUND INTEREST
= 400 x ¿) = 4247.57
2. The present value of an annuity of $20000, received at the end of every year
for 18 years, where the required rate of return is 5.18% per annum,
compounded annually, is: $_______________ (two decimal places)
= 20000 x ¿) = 230538.49
3. An $6000 bank deposit earning annually compounding interest of 8.1% per
annum grows to $_______ (two decimal places) in 6.25 years
S = A x (1 + i)n
= 6000 x (1+8.1%)6.25
= 9762.52
4. If you borrow $13000 for 5 years at an annually compounding rate of 8.42% per annum,
what is the total interest on the loan if the interest due is added to the principal over the
period and repaid at the maturity date? Total interest = $___________ (two decimal places)
(ko co annuity)
S = A x (1 + i)n
5. If you are saving for an overseas trip and put $500 every month into an
account paying 6.59% per annum, compounding monthly, how much will you
have at the end of 3.25 years? $_________________ (two decimal places)
= 500 x ¿) = 21679.55
6. The future value in 6 years of $9,000 invested today, compounding at 8.73%
per annum, is $______________ (two decimal places)
S = A x (1 + i)n
S = A x (1 + i)n
8. If you borrow $15000 for 4 years at an interest rate of 4.77% per annum,
with the interest compounding quarterly, how much will you have to pay at
the end of the period? $_______________ (two decimal places)
S = A x (1 + i)n
9. The present value of an annuity of $500, received at the end of every month
for 20 years, where the required rate of return is 3.31% per annum,
compounded monthly, is: $_______________ (two decimal places)
= 500 x ¿) = 87681.76
10. If interest rates are 7.91% per annum, compounded annually, the present
value of $36000 received at the end of 3 years is: $__________________ (two decimal
places)
A = S x (1+ i)-n
MODULE 9
1. An FX dealer is quoting AUD/USD 0.5373-78.
Transpose the quotation. What is the dealer's bid now? (do not enter the
currency codes)
ASK PRICE 0.5378
2. A French importer has entered into a contract under which it will require
payment in GBP in one month. The company is concerned at its exposure to
foreign exchange risk and decides to enter into a forward exchange contract
with its bank. Given the following (simplified) data, calculate the forward rate
offered by the bank (round your answer to 4 decimal places and do not enter
the three character currency codes). Both countries use a 365-day year;
assume 30 day contract.
[ ( days ∈ year )
]
forward days
1+ ¿ ×
Points=S −1
1+( Ib ×
days∈ year )
forward days
[
( 365 )
]
30
1+ 3.55 % ×
Points=0.7160 −1
1+( 4.35 % ×
365 )
30
= - 0.0005
USD/JPY 112.80-90
112.80 / 0.9530 = 118.36 122.90/0.9520 = 129.09
USD/JPY 114.80-90
144.90/0.9420 = 121.97
CHAPTER 5
2 Disney Corporation is considering the re-release of its classic film library. The
project will involve an investment of $78 000 000 and will produce a positive cash
flow of $25 000 000 in the first year. The cash flows will increase by 10 per cent
each year thereafter for another five years (i.e. the project runs for six years). At that
stage the project will cease. The company expects a rate of return of 17 per cent on
this type of project.
C1 = 25 000 000 -> C2= 27 500 000 -> C3= 30 250 000 -> C4= 33 275 000 ->
CHAPTER 6
11 Caltex Australia Limited pays a constant dividend of $0.60 cents per share. A
fund manager is considering purchasing the shares as part of an investment
portfolio. The fund manager requires a return of 15 per cent on the investment.
Calculate the price that the funds manager would be willing to pay for the shares.
=4
12 The last dividend paid to shareholders by Vicinity Centres was $0.10 per share.
Assume that the board of directors of the company plans to maintain a constant
dividend growth policy of 7.00 per cent. An investor, in evaluating an investment in
the company, has determined that she would require a 12 per cent rate of return
from this type of investment. If the current price of Vicinity shares in the stock
market is $4.00, should the investor purchase the shares? (Show calculations.)your
= 2.14
13 AGL Energy Limited has declared a $0.33 cents per share dividend, payable in
one month. At the same time the company has decided to capitalise reserves
through a one for-three bonus issue. The current share price at the close of business
on the final cum-dividend date is $16.15.
Calculate the theoretical share price [(16.15 – 0.33) x 3] / 4 = 11.86
14 Alumina Limited has a share price of $2.82. The company has made a
renounceable rights issue offer to shareholders. The offer is a three-for-ten pro-rata
issue of ordinary shares at $2.60 per share.
CHAPTER 10
c. Calculate the opportunity cost of an invoice that specifies the following conditions:
1.25/10, n/30.
% discount 365
Opportunity cost= ×
100−% discount days difference between
early∧late settlement
What is the price of the P-notes; that is, what amount will the sale of the commercial
paper raise?
face value× days ∈ year
Price=
days ∈ year+ ( yield
100
× days ¿ maturity )
( 29000000 x 365 )
= 365+ ( 9.20 % x 90 ) = 28,356,729.53
12 A customer of a bank has $500 000 in surplus funds that need to be invested for
a short period of time. The bank offers to sell a 180-day negotiable certificate of
deposit to the customer at a yield of 5.34 per cent per annum. Calculate the face
value of the CD and advise the customer of the dollar return on the CD.
Face value= price [ 365+ ( yield
100
×days ¿ maturity )
365 ]
= 500000 [ 365+ ( 5.34 % × 180 )
365 ] = 513167.12
The dollar return to the discounter, assuming the CD is held to maturity is
513167.12 – 500000 = 13167.12
CHAPTER 10
6 As the owner of a small architectural firm, you approach the Commonwealth Bank
to obtain a term loan so that the firm can buy a new computer-aided drawing
machine. The bank offers your company a loan of $28 500 over a three-year period
at a rate of interest of 8.65 per cent per annum, payable at the end of each month.
Calculate the monthly loan instalment.
A
R=
[ ]
−n
ORDINARY ANNUITY 1−( 1+i )
i
28500
=
[ 1−( 1+8.65 % /12 )−3∗12
8.65 %/12 ] = 901.66
7 The architectural firm owner in Question 6 also approaches the National
Australia Bank to obtain a quote on the loan facility. The competitor bank (NAB)
also offers the company a fully drawn advance of $28 500 over a three-year period
at a rate of interest of 8.65 per cent per annum, but payable in advance at the
beginning of each month. Calculate the monthly loan instalment. Explain why the
instalment payment is different from the instalment in Question 6.
A
R=
ANNUITY DUE
[ 1−( 1+i )−n
i ]
( 1+ i )
28500
=
[ ] = 895.20
−3 x 12
1−( 1+8.65 % /12 )
(1+ 8.65 %/12 )
8.65 % /12
[ ]
−n
1−( 1+i )
i
1046250
=
[ ] = 11411.39
−12∗12
1−( 1+8.15 % /12 )
8.15 % /12
13 Woodside Petroleum Limited has issued $100 million of debentures, with a fixed
interest coupon equal to current interest rates of 7.70 per cent per annum, coupons
paid half-yearly and a maturity of 10 years.
b. After three years, yields on identical types of securities have risen to 8.75 per cent
per annum. The existing debentures now have exactly seven years to maturity. What
is the value, or price, of the existing debentures in the secondary market?