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Question 279  diversification

Do you think that the following statement is or ? “Buying a single company stock usually provides a safer return than a stock mutual fund.”

Question 292  standard deviation, risk

Find the sample standard deviation of returns using the data in the table:

Stock Returns
Year Return pa  
2008 0.3
2009 0.02
2010 -0.2
2011 0.4

The returns above and standard deviations below are given in decimal form.

Question 353  income and capital returns, inflation, real and nominal returns and cash flows, real estate

A residential investment property has an expected nominal total return of 6% pa and nominal capital return of 3% pa.

Inflation is expected to be 2% pa. All rates are given as effective annual rates.

What are the property's expected real total, capital and income returns? The answer choices below are given in the same order.

Question 493  PE ratio

A firm has 2m shares and a market capitalisation of equity of $30m. The firm just announced earnings of $5m and paid an annual dividend of $0.75 per share.

What is the firm's (backward looking) price/earnings (PE) ratio?

Question 501  NPV, IRR, pay back period

The below graph shows a project's net present value (NPV) against its annual discount rate.

Which of the following statements is NOT correct?

Question 531  bankruptcy or insolvency, capital structure, risk, limited liability

Which of the following people is most in danger of being personally bankrupt? Assume that all of their businesses' assets are highly liquid and can therefore be sold immediately.

Question 543  price gains and returns over time, IRR, NPV, income and capital returns

For an asset price to triple every 5 years, what must be the expected future capital return, given as an effective annual rate?

Question 593  future, arbitrage table

The price of gold is currently $700 per ounce. The forward price for delivery in 1 year is $800. An arbitrageur can borrow money at 10% per annum given as an effective discrete annual rate. Assume that gold is fairly priced and the cost of storing gold is zero.

What is the best way to conduct an arbitrage in this situation? The best arbitrage strategy requires zero capital, has zero risk and makes money straight away. An arbitrageur should sell 1 forward on gold and:

Question 634  continuously compounding rate

A $100 stock has a continuously compounded expected total return of 10% pa. Its dividend yield is 2% pa with continuous compounding. What do you expect its price to be in one year?

Question 836  VaR, no explanation

The 95% daily VaR corresponds to the result on the:

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