Question 4 A company offered shares in their IPO at $5.40 each. Their first sale on the ASX was at $5.00. By the end of the first day of trading their shares were trading at $5.80 and today they are trading at $4.80. The cost of under-pricing the issue was

a. The number of shares issued multiplied by 40c

b. The number of shares issued multiplied by 20c.

c. The number of shares issued multiplied by -60c (i.e. overpricing occurred)

d. The number of shares issued multiplied by -40c (i.e. overpricing occurred)

Question 5 Providence Lemons Ltd. has just paid a dividend of $0.80 per share on its ordinary shares. The company has been in business for ten years, and expects that the dividend will grow at 10% for the next two years, after which it is expected to grow at 3% indefinitely. You consider that the required rate of return for shares in this company is 12% per annum. The value of one share in Providence Lemons Ltd is approximately

a. $12.67

b. $11.56

c. $9.45

d. $10.39

Question 6 Barry wishes to save $5,000 for a holiday in 2 years time. Twenty-four equal monthly deposits will be made into an account, the first deposit being made immediately. The account earns interest at 7% p.a. compounding monthly. What is the size of his monthly deposit?

a. $192.41

b. $191.28

c. $190.01

d. $193.57