FENG2016CMEEXAMOLDTUD2013till2016

Which of the following statements regarding American puts is/are true?

The following are the main types of real options:
I) The option to expand if the immediate investment project succeeds
II) The option to wait (and learn) before investing
III) The option to shrink or abandon a project
IV) The option to vary the mix of output or the firm's production methods

The opportunity to invest in a project can be thought of as a three-year real
option that is worth $500 million with an exercise price of $800 million.
Calculate the value of the option given that, N(d1) = 0. 3 and N(d2) = 0.15.
Assume that the interest is 6% per year.
A. $150 million
B. $49.25 million
C. Zero
D. None of the above.

The following are examples of expansion options:
I) A mining company may acquire rights to an ore body that is not worth
developing today but could be profitable if product prices increase
II) A film producing company acquiring the rights to a novel to produce a film
based on the novel in the future
III) A real estate developer may acquire a parcel of land that could be turned
into a shopping mall
IV) A pharmaceutical company may acquire a patent to market a new drug

Given the following data for Project X: NPV of the project without
abandonment: -$2 million; abandonment option value: $4 million. Calculate the
adjusted present value (APV) of the project:
A. -$2 million
B. +$4 million
C. +$2 million
D. none of the above
APV = base-case value + value of financing side effects

Which of the following statements about a project's economic life is (are) true?

In terms of a real option, the cash flows from the project play the same role as:

If an oil well allows the investor the option to drill later, what must happen for
the option to be exercised?

The interest rate on one-year risk-free bond is 5%. BAC company has issued a
5% coupon bond with a face value of $1,000, maturing in one year. If the bond is
considered risk-free, what is the price of the bond?
A. $1,050
B. $1,000
C. $985
D. none of the above

If the discount rate on the bond is 5%, the expected payment in year-1 is
$952.50; calculate the price of the bond:
A. $1050
B. $985
C. $907.14
D. none of the given answers

Beaver, McNichols and Rhie have developed the following model to predict the
chance of failing during the next year relative to chance of not failing for firms:
log(relative chance of failure) = -6.445 - 1.192 ROA + 2.307 (liabilities/assets) -
0.346(EBITDA/liabilities) using:

Banks concerned about risk of loss, may measure Value-at-Risk over what time
period?

A "foreign" bond is a bond:
 

Recently a high proportion of international bond issues are denominated in

A type of bond that has the advantage of secrecy of ownership, but has the
disadvantage of ownership not recorded by the registrar is:

The Alfa Co. has a 6% coupon bond $1.000 outstanding that pays annual
interest. Calculate the annual interest payment

Which of the following bonds is typically secured?

Firms often bundle up a group of assets and then sell the cash flows from these
assets in the form of securities. They are called

A 5% debenture (face value = $1000) pays interest on June 30 and December 31.
It is callable at a price of 105% together with accrued interest. Suppose the
company decides to call the bonds on September 30. What price must it pay for
each bond?
A. $1000.00
B. $1037.50
C. $1062.50
D. $1050.00

The holder of a $1,000 face value bond can be exchanged any time for 25
shares of stock.
Then the conversion price is:
A. $40
B. $25
C. $100
D. None of the above

The holders of ZZZ Corporation's bond with a face value of $1,000 can
exchange that bond for 35 shares of stock. The stock is selling for $25.00.
What is the conversion value of the bond?
A. $1,000
B. $875
C. $1,200
D. None of the above

LYONs are bonds that are:
I) Callable
II) Puttable
III) Convertible
IV) Zero-coupon
A. I and II only
B. I, II and III
C. I, II, III and IV
D. II, III and IV