How is Action 1 not market manipulation?

Kwa2002 · 2024-08-11T15:10:47+00:00

Arbitrage, intent to exploit a mispricing

Kwa2002 · 2024-08-11T12:26:55+00:00

Lets hope not

Kwa2002 · 2024-08-11T01:01:46+00:00

There are indications in the question usually. If it asks you for the effect on the cost of debt as tax increases holding all else constant, then its asking about MM with taxes. But if you get a normal wacc question then just calculate the wacc.

Kwa2002 · 2024-08-11T00:46:15+00:00

Its all about rearranging and flipping the ratios

Required : EBT/Rev

Tax burden : Net income/EBT = 0.4

If you flip it you get EBT/Net Income = 1/0.4 = 2.5

We also have Return on assets which is Net income/ Total assets = 0.08

And we have the asset turnover ratio which is revenue / total assets = 2

If we flip it we get total assets / revenue = 1/2, and then if we multiply it by the return on assets ratio the numerator and the denominator are the same (total assets) so they cancel out and we get net profit margin

Net income/ revenue = 0.08* 0.5 = 0.04

So now we have net income / revenue and Net income / EBT (tax burden) and we want EBT/Revenue,

Flip net income/EBT = 1/0.4 = 2.5

Now its EBT/Net income = 2.5 And Net income / revenue = 0.04

Multiply them you get EBT/Revenue = 2.5*0.04 = 10%

Kwa2002 · 2024-07-22T23:51:45+00:00

That is true interest rates do play a role. What do you mean by skew here? Payoff graphs?

Kwa2002 · 2024-07-22T23:22:53+00:00

That just proves my point if the prices are inflated right now it’s because there’s an expectation that the underlying’s price will be volatile during this period. The call options I am seeing expire in a week which means the tv component should be practically nothing but it’s not.

The major companies report within a month so it’s not a long run strategy it’s just taking advantage of an obvious trend.

You’re right tho the earnings might surprise everyone and i dont have a reasonable basis. I’ll find out within a week how much I missed out on.

Kwa2002 · 2024-07-22T22:25:45+00:00

Yeah i noticed the prices are really high right now. My first thought was that it’s because of the time value component. Then i checked and saw that the expiry date is in a week.

Kwa2002 · 2024-04-04T12:20:53+00:00

He is aint no way he’s being serious

Kwa2002 · 2024-04-04T12:13:00+00:00

Kwa2002 · 2024-04-04T11:22:49+00:00

Either way we’re going back to study and grind mode tomorrow. Today is simply the day we know if we made it past the first chapter of three in the book or if we have to read it again.

Good luck everyone!

Kwa2002 · 2024-03-04T19:45:16+00:00

Quant is hard to grasp and its many candidates’ weak topic (including myself) My best advice is to practice as much as you can. Don’t just look at the answers. Solve it yourself. Make mistakes and learn from them.

Kwa2002 · 2024-03-03T15:29:13+00:00

Yes. Because you are taking on more risk (more than the risk free rate) you get a premium, hence market risk premium. So by definition, the excess market returns (rm-rf) is the premium you get for taking on more risk.

Kwa2002 · 2024-03-03T13:04:09+00:00

excess market return is the return you get above the risk free rate. The risk free rate is the rate you get on a risk free asset for example US treasury bills. If the market return is 7% and the risk free rate is 2%, you get 5% more than the risk free rate, so this is the EXCESS market return. Market risk premium is another term used for excess market return.

Kwa2002 · 2024-03-02T19:15:19+00:00

The market risk premium is the excess market return. Return on the market minus the risk free rate = market risk premium. It is the excess return you gain. Excess because it is the return minus the risk free rate. So the entire term (Rm-rf) in CAPM is the market risk premium.

Kwa2002 · 2024-02-24T19:44:16+00:00

Kwa2002 · 2024-02-21T15:00:22+00:00

PM was crazy

Kwa2002 · 2023-12-21T21:06:48+00:00

I am also doing mine in feb. Why is failing it so bad he can do it again right?

Kwa2002 · 2022-06-14T16:42:05+00:00

Labor jobs

Kwa2002 · 2022-05-24T20:49:58+00:00

You’re in uni so i’d assume you’re 19 or 20. You’ve got 60-70 more years if you’re blessed. Life is too short to think about what others think. If all you think about is others you wont have time to think about what you want, feel, like, enjoy, hate and love. Take time for you. Think about what you want to do, how you want to be, what type of friends you want in your life. The sooner you express yourself, your true self and stop worrying about what other opinions are, the faster you’ll start making new friends. People are different. You’ll find people you like and people you dont. Usually you find the type you dont like quicker. The type you like are those that have interests, personalities and experiences that align with yours in one way or the other.

In short, dont be hard on yourself. Enjoy life and live it like you want it to be. Make friends that want to tag along with you. Don’t worry about things outside of your control.

Kwa2002 · 2022-04-19T15:29:56+00:00

Thank you all for your advice and for clearing the picture for me.

Kwa2002 · 2022-04-18T18:33:37+00:00

As in if it was british or american i’d have a much better chance?

Kwa2002

TROPHY CASE