Question 235 SML, NPV, CAPM, risk
The security market line (SML) shows the relationship between beta and expected return.
Investment projects that plot on the SML would have:
Which of the following investable assets are NOT suitable for valuation using PE multiples techniques?
One and a half years ago Frank bought a house for $600,000. Now it's worth only $500,000, based on recent similar sales in the area.
The expected total return on Frank's residential property is 7% pa.
He rents his house out for $1,600 per month, paid in advance. Every 12 months he plans to increase the rental payments.
The present value of 12 months of rental payments is $18,617.27.
The future value of 12 months of rental payments one year in the future is $19,920.48.
What is the expected annual rental yield of the property? Ignore the costs of renting such as maintenance, real estate agent fees and so on.
A young lady is trying to decide if she should attend university or not.
The young lady's parents say that she must attend university because otherwise all of her hard work studying and attending school during her childhood was a waste.
What's the correct way to classify this item from a capital budgeting perspective when trying to decide whether to attend university?
The hard work studying at school in her childhood should be classified as:
A man has taken a day off from his casual painting job to relax.
It's the end of the day and he's thinking about the hours that he could have spent working (in the past) which are now:
Which of the following statements about futures and forward contracts is NOT correct?
An investor owns a portfolio with:
- 80% invested in stock A; and
- 20% invested in stock B.
Today there was a:
- 10% rise in stock A's price; and
- No change in stock B's price.
No dividends were paid on either stock. What was the total historical portfolio return on this day? All returns above and answer options below are given as effective daily rates.
Below are some statements about European-style options on non-dividend paying stocks. Assume that the risk free rate is always positive. Which of these statements is NOT correct?
Question 871 duration, Macaulay duration, modified duration, portfolio duration
Which of the following statements about Macaulay duration is NOT correct? The Macaulay duration: