A company offered shares in their IPO at $2.00 each. Their first sale on the ASX was at $2.20. By the end of the first day of trading their shares were trading at $2.50 and today they are trading at $2.60. The cost of under-pricing the issue was



2.Thuddungra Turnips Ltd plans to raise $1.2 million to purchase land and plant more crops of turnips. It will issue bonds with a term to maturity of 15 years. The face value per bond will be $1,000 and the coupon rate will be 8% per annum, paid semi-annually. Similar corporate bonds are trading at a yield to maturity of 9% per annum, compounded semi-annually. It is expected that these new bonds will trade at this rate. If the total cost of the bond issue is 3%, how many bonds will Thuddungra Turnips need to issue?



3.A project needs an initial outlay of $3000 for equipment and will net a cash flow of $250 for the next 15 years. At the end of the 15th year, there is a Salvage Value of $1000 for the equipment. What is the NPV of the project if the cost of capital is 15% p.a. effective (to the nearest dollar)?



4.Andy will receive an award of $2,000 at the end of each half year for the next 5 years at 8% p.a. compounding half yearly. What is the future value of Andy's scholarship?



5.Ulysses has an inheritance that promises to pay her 10 year-end amounts of $5,700 starting exactly 3 years from today. If she earns 4.8% p.a., how much is the inheritance worth in present-day dollars?



6.Suppose you buy a share for $100 and expect that the price next year will be:

$125 with a probability of 40%

$115 with a probability of 20%

$105 with a probability of 40%

The standard deviation return on your investment expressed as a percentage to 2 decimal places is:


7.Henry has been offered the opportunity to buy some preference shares in A.C. Hatrick Chemicals Limited. Preference shares are safer than ordinary shares, so Henry thinks that a suitable value for the required rate of return for these shares is 7% per annum. The company will pay an annual dividend at the end of each year... The dividend will be $1.50 per share, and is forecast to be paid forever. Based on this information, one preference share in A.C. Hatrick is worth approximately